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injection of cash and capital into the business but also
improvement to managerial skills and capabilities, which may be provided by these investment dealers.
For companies which require public offering financing,
the functions of an Over-the-Counter market will help to transfer risk to the marketplace and is a proven mechanism elsewhere in the world. In this chamber fourteen months ago, I have already spoken on the need for a OTC market in Hong Kong. Without repeating my views, I am pleased to see that the Stock Exchange of Hong Kong is
studying this in detail and will be putting forward its proposals to Government through the Securities Commission. We must expedite this. It is important to caution that the risk involved in investing in these stocks may be high although the return to
investment may be substantial. The investing public must be under
no disillusion that it will be like investing in blue chip
stocks. Indeed, international experience is that failure rates
will be high for the buyer to beware. Thus, the investor must act
within his own capacity and not take risks which he cannot afford.
Venture capital also fits into the needs of the
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industrial community of Hong Kong, as many of our industries are medium-sized and family-owned. The provision of venture capital
may mean the dilution of control to a family business. However,
with the present structure of limited companies, sufficient
control can still be maintained by the majority shareholder.
the same time, venture capital in the form of equity participation
will mean the sharing of business risk which is not available under debt financing. Hence, an optimal mix of equity and loan financing can be used in the process of venture capital injection. Furthermore, venture capital may provide managerial,
technological or professional support which may be lacking in a business consisting of only family members. Thus, for these companies in Hong Kong, venture capital will provide an
opportunity for them to grow and expand for a return which is
commensurate with the risks involved.
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