HONG KONG AP In an effort to secure Hong Kong's position as Asia's second largest financial center the territory's stock exchange said Tuesday it will start up a new market to help smaller companies raise cash from investors. The ``Growth Enterprise Market'' or GEM aims to entice small- and medium-sized companies from Hong Kong Taiwan and mainland China to list their shares on the new index a statement from the exchange said. It will have less stringent listing rules and profit requirements but will enjoy equal standing to the main board market executives said. ``Developing an effective GEM for Hong Kong mainland and Taiwan's medium-sized companies offers valuable economic benefits and will secure Hong Kong's position as the preeminent market for such enterprises'' said K.S. Lo a vice-chairman of the Stock Exchange Council who is leading the team creating the new market. Hong Kong's market is smaller than the region's top bourse in Tokyo but is locked in an often-intense rivalry with Asia's No. 3 player Singapore. The Hong Kong exchange wants to launch its smaller market in late 1999. The minimum amount of stock which can be offered on the new exchange would either be 38 million Hong Kong dollars U.S. dlrs 4.87 million or 10 percent of a company whichever is higher. The proposed minimum transaction size is 50000 Hong Kong dollars U.S. dlrs 6410. Lo defended the decision to set a minimum transaction size. ``Because of the higher risk of this market we want to target informed investors'' Lo said. ``We don't want to see too much speculation by retail investors.'' He did not however rule out the possibility of reducing the minimum requirement once the secondary market is better established. He said sponsors of potential listing candidates will be responsible for the initial public offering disclosure and the stock exchange will make no assessment of applicant's commercial viability for listing. Listed companies would be required to submit quarterly reports which may be unaudited. Corporate governance requirements will include the appointment of an audit committee a qualified accountant and at least two independent directors. ``Compliance will be strictly monitored and penalties for non-compliance will be high'' Lo added. In a separate development the stock exchange also said Tuesday it has agreed to turn itself into a public body subjecting itself to scrutiny by the territory's independent anti-corruption body. H.C. Lee chairman of the stock exchange said the exchange will allow its executives and managers to be accountable as public servants to the Independent Commission Against Corruption but plans to exclude its ordinary broker members from such scrutiny. The decision is a turnaround from the exchange's earlier stance when it stood firmly against placing itself under the anti-graft body's scrutiny as public servants and public bodies in Hong Kong have been since the body was created in the mid-1970s. APW19981201.0407.txt.body.html APW19981201.0824.txt.body.html