Asia’s second-largest bourse struggles as Chinese firms look for higher valuations
Reuters in Singapore 15 January 2010
Singapore is fast losing its charm for Chinese companies, which once drove its initial public offering bandwagon, threatening its status as a major Asian bourse and posing a big challenge for new SGX chief executive Magnus Bocker.
Singapore Exchange (SGX), Asia’s second-largest bourse by market capitalisation, enjoys high operating margins and has a successful derivatives business. But it lags behind Hong Kong and other Asian bourses in terms of the value of its listed firms.
“If SGX is unable to secure large listings, the long-term threat to Singapore will be severe,” said Ernest Kan, head of the IPO Group at accounting firm Deloitte & Touche in Singapore.
Being a small country, Singapore needs to attract listings from abroad and one way of doing that is to boost the valuation of foreign firms listed on SGX through steps such as improved investor education, says Kan.
While bigger rival Hong Kong is leading the world with multibillion-dollar share offerings, many of them from the mainland, Singapore exchange is struggling to attract and retain the Chinese firms that once dominated its listing pipeline.
Aberdeen Asset Management strategist Peter Elston says the British fund manager owns SGX shares because the Singapore bourse operator is well managed and has a 40 per cent return on equity. There is also potential for the exchange to grow its commodities trading business. “[But] the long-term growth prospects for SGX are not as good as Hong Kong,” he said. “Singapore is always going to struggle because it doesn’t have a hinterland like Hong Kong has.”
SGX shares have risen 60 per cent in the past 12 months, lagging both the 65 per cent jump in the benchmark Straits Times Index and a doubling of Hong Kong Exchanges and Clearing shares.
Goldman Sachs said Bocker, who joined in December, had been “surprisingly quiet on the issue of attracting more offshore IPOs, an area that we believe SGX risks erosion”, and hoped he would talk about plans at the operator’s quarterly earnings due on Monday.
Industry players say they expect at least 10 initial offerings in Singapore worth more than US$100 million each this year, led by India’s top developer DLF which is floating a real estate investment trust (Reit) to raise up to US$1 billion.
The exchange is, however, losing some of its better-quality China companies, which suffer from low valuations due to a spate of corporate scandals involving Singapore-listed Chinese firms. Several firms were taken private last year, while others such as XLX Fertiliser and abalone producer Oceanus now have secondary listings elsewhere in what may be a prelude to an eventual delisting.
Singapore’s stock market is valued at 3.5 times its gross domestic product, the highest ratio in Asia after Hong Kong. SGX is by far the biggest stock market in Southeast Asia but is smaller than Shanghai, Shenzhen, Mumbai, Seoul and Taipei.
Industry players say Singapore is losing the fight to attract China listings because Chinese firms command higher valuations in Hong Kong and other parts of Greater China. China has made it easier for mainland firms to list locally. Oceanus last month priced Taiwan depositary receipts at a 16 per cent premium to its share price, sparking a rally in its Singapore shares.
Singapore’s flotation market came alive in November last year with the listing of CapitaMalls Asia, which raised more than US$2 billion and was the city state’s biggest in 16 years.
Excluding CapitaMalls, however, the biggest IPO last year was worth a mere US$21 million. Singapore only had one offering in 2008 that raised more than US$100 million.
Industry players say that while SGX is losing the battle for Chinese firms, it remains attractive to real estate investment trusts (Reits) from the region because of tax incentives and the presence of many property fund managers in Singapore.
“Investors who qualify can enjoy virtually tax-free income yield from their investment in a Reit,” said Ng Joo Khin of Stamford Law, the legal adviser for Oceanus’ Taiwan offering and Tiger Airways’ ongoing share sale.
ARA, the Singapore property fund management affiliate of Hong Kong’s Cheung Kong (Holdings), plans to launch two property trusts - an Islamic Reit with Qatar property and a regional logistics Reit with warehouse operator CWT.
Each property trust will hold assets worth about S$1 billion (HK$5.58 billion) and their share sales will be managed by DBS, a source involved in the transactions said.
Mapletree Investments, a property firm owned by state investor Temasek, may also float a Reit with up to US$2.8 billion worth of assets including VivoCity, Singapore’s largest mall.
Outside the Reit sector, SGX is also able to attract overseas listings in areas such as plantations, mining, oil services and logistics. Tiger is on an investment roadshow for a US$196 million offering, while British private equity firm 3i is likely to divest its stake in oil services firm Franklin valued around US$250 million.
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Singapore losing fight to lure IPOs
Asia’s second-largest bourse struggles as Chinese firms look for higher valuations
Reuters in Singapore
15 January 2010
Singapore is fast losing its charm for Chinese companies, which once drove its initial public offering bandwagon, threatening its status as a major Asian bourse and posing a big challenge for new SGX chief executive Magnus Bocker.
Singapore Exchange (SGX), Asia’s second-largest bourse by market capitalisation, enjoys high operating margins and has a successful derivatives business. But it lags behind Hong Kong and other Asian bourses in terms of the value of its listed firms.
“If SGX is unable to secure large listings, the long-term threat to Singapore will be severe,” said Ernest Kan, head of the IPO Group at accounting firm Deloitte & Touche in Singapore.
Being a small country, Singapore needs to attract listings from abroad and one way of doing that is to boost the valuation of foreign firms listed on SGX through steps such as improved investor education, says Kan.
While bigger rival Hong Kong is leading the world with multibillion-dollar share offerings, many of them from the mainland, Singapore exchange is struggling to attract and retain the Chinese firms that once dominated its listing pipeline.
Aberdeen Asset Management strategist Peter Elston says the British fund manager owns SGX shares because the Singapore bourse operator is well managed and has a 40 per cent return on equity. There is also potential for the exchange to grow its commodities trading business. “[But] the long-term growth prospects for SGX are not as good as Hong Kong,” he said. “Singapore is always going to struggle because it doesn’t have a hinterland like Hong Kong has.”
SGX shares have risen 60 per cent in the past 12 months, lagging both the 65 per cent jump in the benchmark Straits Times Index and a doubling of Hong Kong Exchanges and Clearing shares.
Goldman Sachs said Bocker, who joined in December, had been “surprisingly quiet on the issue of attracting more offshore IPOs, an area that we believe SGX risks erosion”, and hoped he would talk about plans at the operator’s quarterly earnings due on Monday.
Industry players say they expect at least 10 initial offerings in Singapore worth more than US$100 million each this year, led by India’s top developer DLF which is floating a real estate investment trust (Reit) to raise up to US$1 billion.
The exchange is, however, losing some of its better-quality China companies, which suffer from low valuations due to a spate of corporate scandals involving Singapore-listed Chinese firms. Several firms were taken private last year, while others such as XLX Fertiliser and abalone producer Oceanus now have secondary listings elsewhere in what may be a prelude to an eventual delisting.
Singapore’s stock market is valued at 3.5 times its gross domestic product, the highest ratio in Asia after Hong Kong. SGX is by far the biggest stock market in Southeast Asia but is smaller than Shanghai, Shenzhen, Mumbai, Seoul and Taipei.
Industry players say Singapore is losing the fight to attract China listings because Chinese firms command higher valuations in Hong Kong and other parts of Greater China. China has made it easier for mainland firms to list locally. Oceanus last month priced Taiwan depositary receipts at a 16 per cent premium to its share price, sparking a rally in its Singapore shares.
Singapore’s flotation market came alive in November last year with the listing of CapitaMalls Asia, which raised more than US$2 billion and was the city state’s biggest in 16 years.
Excluding CapitaMalls, however, the biggest IPO last year was worth a mere US$21 million. Singapore only had one offering in 2008 that raised more than US$100 million.
Industry players say that while SGX is losing the battle for Chinese firms, it remains attractive to real estate investment trusts (Reits) from the region because of tax incentives and the presence of many property fund managers in Singapore.
“Investors who qualify can enjoy virtually tax-free income yield from their investment in a Reit,” said Ng Joo Khin of Stamford Law, the legal adviser for Oceanus’ Taiwan offering and Tiger Airways’ ongoing share sale.
ARA, the Singapore property fund management affiliate of Hong Kong’s Cheung Kong (Holdings), plans to launch two property trusts - an Islamic Reit with Qatar property and a regional logistics Reit with warehouse operator CWT.
Each property trust will hold assets worth about S$1 billion (HK$5.58 billion) and their share sales will be managed by DBS, a source involved in the transactions said.
Mapletree Investments, a property firm owned by state investor Temasek, may also float a Reit with up to US$2.8 billion worth of assets including VivoCity, Singapore’s largest mall.
Outside the Reit sector, SGX is also able to attract overseas listings in areas such as plantations, mining, oil services and logistics. Tiger is on an investment roadshow for a US$196 million offering, while British private equity firm 3i is likely to divest its stake in oil services firm Franklin valued around US$250 million.
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