As Hong Kong exchange officials celebrate the end of a lucrative year, a major challenge is looming the lack of behemoths ready to list in 2007.

Hong Kong raised a record $43.8 billion in 2006, surpassing New York to become the world's second-largest initial public offering (IPO) market after London. But the figure would have been a lot more modest without Bank of China and the Industrial and Commercial Bank of China, which together raised $30 billion.

Hong Kong has been the first-choice listing destination for mainland companies since the late 1990s. But since it has already hosted almost all the big mainland names, it now has just a handful of other giants to look forward to.

To maintain its position as the world's seventh-biggest bourse it will have to cast its net wider both on the mainland and further afield.

The Hong Kong stock exchange proposal to reform listing rules to encourage more overseas companies to list in the city is a step in the right direction. At present, only those registered in Hong Kong, on the mainland, the Cayman Islands and Bermuda can do so.

The rule change is likely to draw multinational corporations with operations in the region. But what could really attract overseas companies to Hong Kong are the international market and the sound knowledge its investors have about Asia, especially China.
Hong Kong should also try to woo the small and medium-sized enterprises on the mainland that comprise the most active part of the world's fourth-largest economy. These firms have been pursuing the European and US exchanges and have the power to revitalize Hong Kong's ailing secondary board.

Hong Kong's smaller peer, Singapore, offers a good example the country's top officials promote it as "Asia's best exchange for SMEs" at almost every trade and investment fair held.

Hong Kong should follow the same path.

Editor: Yan