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Wednesday, 11 March 2009
S-Chips’ Fall Stings Singapore
But a little more discrimination would have served the exchange, and stock investors, better. In its battle with Hong Kong for listings, Singapore got more than its share of Chinese leftovers.
When investors were frantically buying all things Chinese, Singapore’s stock exchange was an eager seller, building a franchise around Chinese listings.
But a little more discrimination would have served the exchange, and stock investors, better. In its battle with Hong Kong for listings, Singapore got more than its share of Chinese leftovers.
That may not have been apparent while China’s stock-market bubble was inflating, but it is now, as the stocks known as S-chips are pummelled more severely than other China plays. The FTSE ST China index, which tracks Singapore’s largest and most-liquid S-chips, is down 70% from a year ago. Shanghai’s benchmark index and Hong Kong-listed Chinese stocks are down less than 50%.
For a time, S-chips were good business for Singapore’s stock-market operator, Singapore Exchange. The 130-odd stocks floated there since 2001 accounted for nearly half of the exchange’s new listings during that period. And they were actively traded, despite their small size.
Worse than lost profit for Singapore Exchange is the damage to the S-chip reputation from a recent string of corporate-governance problems. Two companies have had forced share sales as controlling shareholders, in both cases the chairman, defaulted on borrowings backed by company stock. China Printing & Dyeing ceased operations after saying its chief executive was “uncontactable” and “untraceable,” citing Chinese media reports he is in police custody on suspicion of illegally raising funds and destruction of accounting documents.
Singapore Exchange says violations of its rules will be dealt with.
Still, there’s an inherent risk in attempting oversight of firms that mostly operate abroad. And there’s more the exchange can do, such as mandating disclosure when shares are pledged against loans. Investors, meanwhile, ponder which will be the next S-chip casualty.
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S-Chips’ Fall Stings Singapore
THE WALL STREET JOURNAL ASIA
11 March 2009
When investors were frantically buying all things Chinese, Singapore’s stock exchange was an eager seller, building a franchise around Chinese listings.
But a little more discrimination would have served the exchange, and stock investors, better. In its battle with Hong Kong for listings, Singapore got more than its share of Chinese leftovers.
That may not have been apparent while China’s stock-market bubble was inflating, but it is now, as the stocks known as S-chips are pummelled more severely than other China plays. The FTSE ST China index, which tracks Singapore’s largest and most-liquid S-chips, is down 70% from a year ago. Shanghai’s benchmark index and Hong Kong-listed Chinese stocks are down less than 50%.
For a time, S-chips were good business for Singapore’s stock-market operator, Singapore Exchange. The 130-odd stocks floated there since 2001 accounted for nearly half of the exchange’s new listings during that period. And they were actively traded, despite their small size.
Worse than lost profit for Singapore Exchange is the damage to the S-chip reputation from a recent string of corporate-governance problems. Two companies have had forced share sales as controlling shareholders, in both cases the chairman, defaulted on borrowings backed by company stock. China Printing & Dyeing ceased operations after saying its chief executive was “uncontactable” and “untraceable,” citing Chinese media reports he is in police custody on suspicion of illegally raising funds and destruction of accounting documents.
Singapore Exchange says violations of its rules will be dealt with.
Still, there’s an inherent risk in attempting oversight of firms that mostly operate abroad. And there’s more the exchange can do, such as mandating disclosure when shares are pledged against loans. Investors, meanwhile, ponder which will be the next S-chip casualty.
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