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UK advisers struggling with Chinese stock listings

Monday, May 23, 2016 - 07:17

[LONDON] Almost two-thirds of the advisory firms who assist in stock exchange listings in London say they are struggling to guide Chinese firms through the process, a survey showed, in the latest sign of problems with such initial public offerings.

The survey by accounting firm Moore Stephens showed 64 per cent of advisers said they had faced difficulties in communicating with Asia-Pacific and Chinese companies listing on the small-cap Alternative Investor Market (AIM).

"China is a key market for AIM, but unfortunately the adviser-client relationship is often not functioning as smoothly and successfully as it might," said Marty Lau, Head of Capital Markets at Moore Stephens.

Of the 40-odd China-based firms to list on AIM over the past decade, only a handful have seen their shares rise in value.

At a time when Beijing is steadily opening the way to more investment flows into and out of China, at least 15 Chinese firms on AIM have delisted and the majority have seen their value fall by at least 50 per cent compared with their initial valuations.

The lack of confidence in the Chinese listings has added to broader criticism of AIM, which one US regulator has described as a "casino" where 30 per cent of issuers are gone in a year.

"Companies are very aware of the importance of good communication with advisers, as well as investors and regulators, but from where advisers are standing, especially as regards China, the appropriate channels are not always clear," Mr Lau said.

Nominated advisers are responsible for helping firms list and providing broking services and research coverage.

Mr Lau said that if companies opened offices in the UK and appointed UK-domiciled executive directors it might help restore confidence.

But investors in the market say the issues are broader. "A lot of companies have had problems with corporate governance, and it's unclear why the exchange doesn't do anything about it," said Colin McLean, chief executive of SVM Asset Management and an investor in the market.

He is an investor in Hutchison China Medtech, one of the few Chinese AIM stocks to have risen in price since its launch. Its shares are up nearly five-fold since listing.

REUTERS