This article first appeared in Capital, The Edge Malaysia Weekly on November 25, 2024 - December 1, 2024

THERE is growing interest among companies, including from China, in seeking a secondary listing in Malaysia, says CGS International Securities Pte Ltd, a regional investment bank with Chinese parentage. CGS International is the international arm of China Galaxy Securities Co Ltd (CGS).

“From our experience at least, there has definitely been interest from Chinese companies. It always takes the first one to get the momentum going,” CGS International group CEO Carol Fong tells The Edge in an interview. She was speaking on the sidelines of the CGS Southeast Asia Bilateral Investment Forum 2024 in Haikou, in the southern Chinese island province of Hainan, last month.

CGS International recently helped Chinese firm Helens International Holdings Co Ltd with its secondary listing on the Singapore Exchange (SGX). The investment bank was the issue manager and underwriter for the listing, which took place on July 19. Helens, which runs one of the largest bar chain networks in China, has a primary listing on the Hong Kong stock exchange.

According to Fong, CGS International currently has mandates from two SGX-listed companies that are keen on having a secondary listing on Bursa Malaysia’s Main Market. However, she declines to name them. “These will take place only next year,” she says.

Interestingly, SGX-listed Grand Venture Technology Ltd announced in September that it was eyeing a secondary listing in Malaysia. The manufacturing services company said it was still discussing the details and structure of the proposed secondary listing, and that it had not made any application with the authorities thus far.

Bloomberg had reported earlier that the company was working with advisers for a listing by introduction — meaning, it would not be for the purpose of raising funds — as soon as 2025.

Grand Venture, which makes sheet metal components and modules for various industries such as semiconductor and life sciences, has operations in Singapore, Malaysia and China.

In July, SGX-listed UMS Holdings Ltd said it intended to seek a secondary listing on Bursa’s Main Market. In a bourse filing, the semiconductor group said this could help widen its investor reach as well as base, on top of potentially improving the liquidity of its shares through separate trading platforms.

This is certainly a reverse from the norm in the past, when it was Malaysia-listed companies that looked across the Causeway for a secondary listing.

“If you look back to five, eight years ago, the dual listings that happened were more from Malaysia to Singapore. There was Top Glove [Corp Bhd] (KL:TOPGLOV) coming over and many others. But suddenly, you now see the reverse happening. So, it’s quite an interesting dynamic,” Fong highlights.

One of the reasons more companies are opting for a dual listing now is because of the need for improved visibility and branding, she says.

“Fundraising could be one reason, but it’s usually not the primary reason. What’s more important, I find, is that companies dual list to enhance their branding … to create brand awareness in other markets.

“And of course, if they are dual listed in another market, it’s also easier for them to find partnerships [with others] to expand, rather than make connections and expand on their own. So these, I think, are some of the primary drivers for dual listings.”

Malaysia’s sudden surge in initial public offering (IPO) activity this year has also helped stir interest in dual listings, she says. “Like I said, you start off with the first few doing well, then it creates a lot of momentum. But I also think due credit [should go] to the Malaysian government as it has been working to improve the capital markets for many years.”

For the year to Nov 21, there were 46 new listings on Bursa, a strong increase from just 32 in 2023 and 35 in 2022. In comparison, SGX has had a dry spell this year, with just four primary listings year to date, making it the weakest market in Asean for IPO activity.

Fong says CGS International helped arrange meetings between “several” Chinese companies and representatives from the Securities Commission Malaysia (SC) on the sidelines of the investment forum in Haikou. “These are companies looking to explore a [listing or secondary listing],” she adds.

Malaysia, while welcoming of such companies, is showing discernment of the quality of companies that it allows on its exchange, having learnt bitter lessons in the past.

Datuk Zain Azhari Mazlan, the SC’s executive director of corporate finance and investments, who was one of the speakers at the forum, said Malaysia remains open and welcoming to Chinese companies seeking to list on Bursa, be it for their primary or secondary listing.

“Malaysia saw an influx of China-based companies seeking a primary listing via IPO on Bursa Malaysia about 15 years ago from 2009 to 2013, but a number of these companies have since delisted or undergone takeovers, largely due to corporate governance issues, financial performance and compliance with audit and listing requirements,” Zain said in an interview with Bernama.

“These experiences have provided valuable lessons for both the market and regulators, prompting ongoing efforts to strengthen listing requirements and investor protection,” he added.

Fong points out that it is also not as easy for Chinese companies to list overseas now as it was in the past.

“In the past, there was no framework set up between the stock exchanges. But now, there’s a reset. There’s a framework, for example, between the SGX and the China Securities Regulatory Commission (CSRC). Measures were introduced by CSRC to align and unify the institutional requirements and regulatory systems for all overseas offerings and listings by [Chinese] domestic companies outside of mainland China,” she says.

“So, nowadays, if Chinese companies want to list overseas, even though they’re listed in Hong Kong, they must get the CSRC’s approval. In those days, you didn’t need the approval. Hence, there’s one level of supervision, I would say, which at least gives investors a level of comfort, knowing that the regulator in the home market has approved the listing.”

Malaysia does not currently have a framework with the CSRC.

To preserve CGS’ strong reputation in China, CGS International places a great emphasis on ensuring that the companies it helps take for a dual listing are of sound quality, says Fong. When it comes to dual listings, its concentration right now is Singapore and Malaysia, she adds.

CGS International is wholly owned by CGS, one of the leading securities firms in China. For perspective, CGS is ranked No 1 in terms of number of branches in China and No 4 in terms of operating income.

CGS is a subsidiary of Central Huijin Investment Co Ltd which, in turn, is wholly owned by China Investment Corporation (CIC), one of the world’s largest sovereign wealth funds in terms of assets under management. Its assets under management as at end-2023 came to US$1.33 trillion.

In 2017, CGS expanded into Asean via a joint-venture (JV) partnership with Malaysia’s CIMB Group. Late last year, CGS bought out the remaining stake held by CIMB Group — made possible through call options that were incorporated into their initial partnership agreement — and, thereafter, set out to become a standalone regional investment banking group.

“While we were under the JV with CIMB, we could not do investment banking, for example, because we fell under the CIMB [banner]. The moment we became a standalone entity, we accelerated our investment banking activities. So, I would say we are the new kid on the block who is hungry and very passionate about the business, and I think we have something different to offer to the Malaysian investment banking scene,” says Fong, who prior to helming CGS international had been with CIMB Group since 2005. She was part of Singapore firm GK Goh, whose equities business was acquired by CIMB Group in 2005.

“Just to give you an example of how fast we’ve moved: about 1½ years ago, we did not have an investment banking licence. Today, we’ve got our full investment banking licences in Singapore, Malaysia, Indonesia and Thailand. And from one staff, we now have over 40 people in the Asean region. CGS has over 600 investment bankers in China,” she says, adding that Singapore-headquartered CGS International is in a unique position as the “nexus between China and Asean”.

“That’s the differentiating factor for us among the investment banks. If you look at all the Asean investment banks, how many can say they have the Chinese connections that we have? We have such a strong shareholder in CGS and CIC, and yet we also have 45 years of heritage in Asean, which means the connections that we have in Asean are also strong,” she remarks.

Be that as it may, investment banking is a highly competitive space and the onus is on CGS International as the relatively “new” player to prove itself in the market.

“CIMB, Maybank, RHB, all have very established [investment banks]. So we, as the new kid on the block, have to prove ourselves. And we can only do that by doing a couple of things — bring new investors to the table, for example. Can we bring new investors from outside, who not only become investors in IPOs, but also create extra synergies by forming partnerships with Malaysian companies venturing into China? That’s where I think we can play a big role,” says Fong.

Meanwhile, CGS International has been busy building up its IPO deal pipeline. “We are likely to be mandated for two or three Main Market IPOs in Malaysia next year,” she reveals.

On the brokerage front, CGS International remains a dominant player. At end-October, it was ranked No 1 in Malaysia and No 3 in Singapore by market share in terms of total trading volume on the respective stock markets. 

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