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New, direct route for China firms seeking S'pore listing

They will need approval of both SGX and CSRC; won't have to set up holding company in a tax haven

AMID an initial public offering (IPO) freeze in China, the stock-market regulators of China and Singapore have set up a framework for Chinese companies to list here, a move that might see more such companies seeking capital from investors here.

Under the framework announced yesterday, Chinese-owned, China-incorporated companies will be able to list on Singapore Exchange (SGX) after getting approval from the China Securities Regulatory Commission (CSRC) as well as SGX by fulfilling the requirements of relevant laws and regulations of both sides.

SGX CEO Magnus Bocker said investors here would have more choices and access to the growing Chinese economy.

The new development effectively gives China companies another pathway to get listed here. The traditional route was setting up a holding company in tax havens such as Bermuda and the British Virgin Islands, and listing that holding vehicle here.

An unstated hope is also that market confidence in China companies, dubbed S-chips, will improve. The reputation of S-chips has been tarnished by a spate of accounting and corporate governance scandals in the past few years.

"The regulatory processes and due diligence conducted by the relevant regulatory organisations in both countries will provide greater assurance to the marketplace," said SGX's deputy chief regulatory officer Richard Teng.

Lawrence Wong, SGX head of listings, added that he continued to see interest from Chinese companies wanting to list in Singapore.

Tong Dao Chi, director-general of CSRC's department of international affairs, said the regulator would work to give Chinese domestic enterprises a better understanding of listing requirements and a more efficient procedure and platform to list on SGX.

Under the framework, potential issuers will first do a pre-consultation with SGX before submitting their proposal to CSRC. Upon CSRC's acknowledgement of the receipt of relevant documents, the China companies can apply to begin the SGX review process.

Then, the companies will need to get CSRC's administrative licensing approval, before SGX decides on whether to grant it eligibility to list here. CSRC's review typically includes checks on whether the company paid the necessary taxes, or own the proper legal title to land assets. SGX and CSRC generally have consistent standards for accounting and corporate governance.

Out of the 140 S-chips here, only four are China-incorporated, and it has been many years since the last listing. The four are China Merchants Property Development (listed on SGX in 1995), Tiangjin Zhongxin (listed in 1997), Junma Tyre (listed in 2004) and Fujian Zhenyun (listed in 2007).

The agreement between SGX and CSRC arose out of bilateral initiatives to cooperate on financial sector development and regulation, agreed upon at last month's Joint Council for Bilateral Cooperation, the top bilateral body between Singapore and China.

CSRC is the main regulator of China's securities industry. A year ago, it had blocked all IPOs from taking place in China due to fraud and market confidence issues. The IPO freeze resulted in a long pipeline of hundreds of companies.

Some of those companies which have started on the CSRC process but are stuck waiting could now be drawn to Singapore, said Ernest Kan, chief of operations for clients and markets at Deloitte Singapore.

"The question is whether the company wants to go the extra mile and comply with international accounting standards to list here, or continue to wait," he said.

"Valuations in Singapore have improved in the past 12 months, and there is enough attraction to come here compared to Hong Kong."