SINGAPORE (Sept 22): Singapore Exchange is forecasting an end to a two-year hiatus for Chinese listings after regulators made it easier for companies from Asia’s biggest economy to sell shares in the city-state.
SGX expects some initial public offerings from Chinese companies in 2015, Lawrence Wong, head of listings at the exchange operator, said in an interview on Sept. 17.
The last was Sincap Group in June 2012. SGX and the China Securities Regulatory Commission signed a deal in November that allows mainland companies to list on the Southeast Asian bourse without having to incorporate an overseas holding company.
“China has been on our radar for a long time,” Wong said.
“The arrangement with CSRC allows Chinese companies incorporated in China to list in Singapore directly. This is very significant. In the past, it was very difficult for mainland companies to do so.”
After a flurry of Chinese companies known as the S-chips listed in Singapore in 2007, IPOs dried up as debt defaults and accounting scandals saw stocks from FerroChina to Sino Techfibre delisted or suspended.
An influx of companies would help SGX recover from a slump in new share sales and trading volume this year.
Companies raised US$2.2 billion ($2.8 billion) from Singapore IPOs in 2014, a 53% decline from the same period last year, as South Korea’s Lotte Shopping Co. and Indonesia’s Samudra Energy postponed offers.
An average $1.05 billion of shares were traded on the bourse each day this year, down 32% from a year earlier.
Of the 770 companies listed on Southeast Asia’s largest exchange, 130 are from China, according to the bourse.
Yangzijiang Shipbuilding Holdings, China’s second-largest private shipbuilder, raised $943.5 million in April 2007, the Singapore exchange’s largest IPO by a mainland company.
SGX is working on some big Chinese IPOs, Wong said, declining to comment on whether they would be larger than Yangzijiang Shipbuilding.
Still, SGX is taking steps to avoid a repeat of the problems that plagued some S-chips, Wong said.
In the case of FerroChina, which had a market value of more than $2 billion in 2007, shareholders lost their entire investment when the steelmaker was forced to delist in March 2010.
Other stocks that have been suspended include Sino Techfibre, which said a fire destroyed its financial records after reporting accounting flaws, and China Sun Bio-Chem Technology Group Co., which said a truck transporting its accounting records was stolen.
“We’ve learned from that episode,” Wong said.
“When things happened, SGX required Chinese companies to conduct checks and audits.
Having the direct listing framework with CSRC will help. There’s at least another pair of eyes.”