Bourse rule barring firms with over 30% Chinese shareholders is a hurdle
By Goh Eng Yeow 13 March 2010
The notion that the Taiwan bourse is an untapped gold mine for S-chips - China plays listed here - is not looking like a done deal. The red carpet, in other words, is not being rolled out.
The problems encountered by Changtian Plastic & Chemical have highlighted that Taiwanese riches are not there for the picking.
Changtian wanted to issue Taiwan depository receipts (TDRs) but was prevented from doing so because more than 30 per cent of its shares are held by shareholders with mainland Chinese citizenship.
That meant Changtian, listed in Singapore but based in China, could not reap the TDR benefits.
A TDR is a Taiwan-registered certificate traded in Taipei by a firm which is already listed on another bourse, such as the Singapore Exchange (SGX). An investor who buys TDRs gets ownership of a number of shares in the firm and any dividends paid.
Amid much fanfare among traders last October, Changtian announced that it wanted to issue TDRs to raise up to 300 million yuan (S$61 million) in Taiwan.
But the guideline caught it out.
The firm stated last month that the main reason for not going ahead with the TDRs was that ‘the company has more than 30 per cent of its shareholdings interests held by nationals of the People’s Republic of China’.
‘Although numerous discussions and consultations have been carried out with the relevant regulatory authorities in (Taiwan), there may still be delays in the processing of the application for the TDRs,’ it added.
The delay might well extend beyond the April 30 deadline the company was given to issue new shares to be converted into TDRs so it has decided to halt the TDR plan.
Corporate lawyers say there is a guideline in the Taipei bourse’s rules book which prohibits a firm with more than 30 per cent of its shares held by mainland Chinese citizens from listing there. The same guideline apparently also applies to firms which want to issue TDRs in Taipei.
Changtian’s inability to launch a TDR will be a blow to other S-chips with similar shareholdings structure, but it can still be done if the investor balance is right.
China-based abalone producer Oceanus successfully launched its TDRs in Taipei at the end of December, joining two SGX-listed firms - Medtecs International and Eastern Asia Technology - whose TDRs were already traded on the Taipei bourse.
As of yesterday, Oceanus TDRs traded at NT$12.80 (56.2 Singapore cents) - a whopping 60.6 per cent premium over Oceanus shares’ 35-cent closing price on the SGX.
A corporate lawyer noted that Oceanus did not face the same hurdle as Changtian did because its major shareholder – Dr. Ng Cher Yew – is Singaporean.
But some market observers believe the difficulties encountered by S-chips in getting a TDR off the ground may be a blessing in disguise.
This is because there is almost no way a retail investor can convert his SGX-listed shares into TDRs. That means there is no way he can turn a profit from exploiting any difference a company’s share prices may have on the two bourses.
Instead, S-chips with dual-listing ambitions may find Hong Kong to be a more attractive alternative listing venue. China plays that have secured secondary listings in Hong Kong recently include fertiliser maker China XLX and handset designer Z-Obee.
Unlike TDRs, which trade at a big premium compared with the SGX-listed shares, China XLX and Z-Obee trade at almost identical prices in Singapore and Hong Kong.
Yesterday, China XLX closed at 59 cents in Singapore and at HK$3.25 (58.4 cents) in Hong Kong, while Z-Obee traded at 37 cents in Singapore and HK$2.10 in Hong Kong.
Remisier Thomas Teo noted that one attraction of an S-chip with a dual Hong Kong listing is the much heavier trading volume it attracts.
On an average trading day over the past three months, about 7.62 million shares of China XLX were traded in Singapore while 11.9 million units changed hands in Hong Kong.
In Z-Obee’s case, about 22 million shares changed hands in Singapore each day in the past three months, while in Hong Kong, about 21 million shares were traded daily, after it started trading there two weeks ago.
Another attraction is the much higher valuation the shares may fetch in Hong Kong.
Lawyer Robson Lee from Shook Lin & Bok noted: ‘Take furniture maker Man Wah. It delisted here at four times price-earnings six months ago. It is now going for listing in Hong Kong at between 17 and 24 times price-earnings.’
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No red carpet for S-chips in Taiwan
Bourse rule barring firms with over 30% Chinese shareholders is a hurdle
By Goh Eng Yeow
13 March 2010
The notion that the Taiwan bourse is an untapped gold mine for S-chips - China plays listed here - is not looking like a done deal. The red carpet, in other words, is not being rolled out.
The problems encountered by Changtian Plastic & Chemical have highlighted that Taiwanese riches are not there for the picking.
Changtian wanted to issue Taiwan depository receipts (TDRs) but was prevented from doing so because more than 30 per cent of its shares are held by shareholders with mainland Chinese citizenship.
That meant Changtian, listed in Singapore but based in China, could not reap the TDR benefits.
A TDR is a Taiwan-registered certificate traded in Taipei by a firm which is already listed on another bourse, such as the Singapore Exchange (SGX). An investor who buys TDRs gets ownership of a number of shares in the firm and any dividends paid.
Amid much fanfare among traders last October, Changtian announced that it wanted to issue TDRs to raise up to 300 million yuan (S$61 million) in Taiwan.
But the guideline caught it out.
The firm stated last month that the main reason for not going ahead with the TDRs was that ‘the company has more than 30 per cent of its shareholdings interests held by nationals of the People’s Republic of China’.
‘Although numerous discussions and consultations have been carried out with the relevant regulatory authorities in (Taiwan), there may still be delays in the processing of the application for the TDRs,’ it added.
The delay might well extend beyond the April 30 deadline the company was given to issue new shares to be converted into TDRs so it has decided to halt the TDR plan.
Corporate lawyers say there is a guideline in the Taipei bourse’s rules book which prohibits a firm with more than 30 per cent of its shares held by mainland Chinese citizens from listing there. The same guideline apparently also applies to firms which want to issue TDRs in Taipei.
Changtian’s inability to launch a TDR will be a blow to other S-chips with similar shareholdings structure, but it can still be done if the investor balance is right.
China-based abalone producer Oceanus successfully launched its TDRs in Taipei at the end of December, joining two SGX-listed firms - Medtecs International and Eastern Asia Technology - whose TDRs were already traded on the Taipei bourse.
As of yesterday, Oceanus TDRs traded at NT$12.80 (56.2 Singapore cents) - a whopping 60.6 per cent premium over Oceanus shares’ 35-cent closing price on the SGX.
A corporate lawyer noted that Oceanus did not face the same hurdle as Changtian did because its major shareholder – Dr. Ng Cher Yew – is Singaporean.
But some market observers believe the difficulties encountered by S-chips in getting a TDR off the ground may be a blessing in disguise.
This is because there is almost no way a retail investor can convert his SGX-listed shares into TDRs. That means there is no way he can turn a profit from exploiting any difference a company’s share prices may have on the two bourses.
Instead, S-chips with dual-listing ambitions may find Hong Kong to be a more attractive alternative listing venue. China plays that have secured secondary listings in Hong Kong recently include fertiliser maker China XLX and handset designer Z-Obee.
Unlike TDRs, which trade at a big premium compared with the SGX-listed shares, China XLX and Z-Obee trade at almost identical prices in Singapore and Hong Kong.
Yesterday, China XLX closed at 59 cents in Singapore and at HK$3.25 (58.4 cents) in Hong Kong, while Z-Obee traded at 37 cents in Singapore and HK$2.10 in Hong Kong.
Remisier Thomas Teo noted that one attraction of an S-chip with a dual Hong Kong listing is the much heavier trading volume it attracts.
On an average trading day over the past three months, about 7.62 million shares of China XLX were traded in Singapore while 11.9 million units changed hands in Hong Kong.
In Z-Obee’s case, about 22 million shares changed hands in Singapore each day in the past three months, while in Hong Kong, about 21 million shares were traded daily, after it started trading there two weeks ago.
Another attraction is the much higher valuation the shares may fetch in Hong Kong.
Lawyer Robson Lee from Shook Lin & Bok noted: ‘Take furniture maker Man Wah. It delisted here at four times price-earnings six months ago. It is now going for listing in Hong Kong at between 17 and 24 times price-earnings.’
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