Hong Kong's stock exchange announced Friday that it will allow the listing of an increasingly popular investment vehicle called special purpose acquisition companies (SPAC) starting next month.

SPACs, which are sometimes called "blank cheque" companies, raise funds through an initial public offering to acquire an existing entity.

They have been a popular way for companies to go public in recent years because it is usually a faster, less costly and less onerous process in terms of regulatory requirements than a traditional IPO.

Hong Kong's exchange (HKEX) will accept SPAC listing applications starting January 1, 2022.

HKEX CEO Nicolas Aguzin said the new listing regime "reflects our commitment to continue to build Hong Kong's reputation as the region's premier capital-raising market."

New listing rules include investor safeguards, such as requiring each SPAC listing to have at least 20 institutional backers and investment thresholds for large private investors.

Hong Kong's stock exchange had been wary about SPACs even as the investment vehicle generated a deal-making frenzy in the United States starting last year.

In the first half of 2021, 350 companies went public on US exchanges with SPAC, raising $107.6 billion, according to Dealogic.

But SPACs have also drawn greater attention from regulators due to questions over transparency.

Hong Kong's announcement follows in the steps of regional rival Singapore, which said in September that it would start accepting SPAC listings.

HKEX has struggled in the second half of this year as a number of major initial public offerings were delayed.

In October, the bourse reported its second consecutive quarterly profit decline, with net income falling to 3.25 billion Hong Kong dollars ($418 million) in the three months through September.

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