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More China stocks for SGX?
I know of several market watchers who have expressed incredulity, bewliderment and puzzlement at SGX's moves to strengthen its China presence, moves which include posting its Listings head Lawrence Wong to China. These observers question the wisdom of the idea, the sentiment being "haven't they learned their lesson?'', a reference of course, to the S-chip scandal that erupted around 2009 and has tainted the entire China stock segment traded here. Quite understandably, the reasoning is that local investors have been so badly burned by the failure of many such stocks that it is unlikely that they would be interested in trying their luck a second time round. It's like asking retail investors to give Malaysian shares a second chance after the crash of Clob International in 1998 - few, if any, would bother.
I have to confess to sharing the same sentiment but if you think about it, the exchange really has little choice if it is to develop the local equities market. The Singapore corporate sector is small, so SGX has to look overseas for new offerings. Problem is, Malaysian companies would prefer to list on Bursa Malaysia, Thai companies on the SET and Indonesian companies in Jakarta. For whatever reasons - nationalistic duty, greater familiarity among domestic investors, better coverage from their own brokers - it is very difficult to attract foreign companies in the same time zone to list outside of their domestic markets. The task gets even harder if time differences are taken into consideration. Ergo, China. A vast country with thousands of companies from which to choose, perhaps with enough to go around exchanges who are prepared to take them in.
True, Hong Kong, Shanghai and Shenzhen would get the pick of the crop but I am optimistic that SGX, having suffered the unpleasant experience of a failed S-chip exercise first time round, will be all the more determined to succeed now. It will surely pull out all the stops to ensure that the unfortunate episode of a few years ago is not repeated. There will be plenty of checks and balances to ensure maximum quality and investor protection. This of course, does not mean that there won't be any problems in future with China companies, but I would like to think that these problems will be minimal.
Moreover, SGX has the right man for the job - Lawrence is a veteran when it comes to China, a solid, dependable performer who is ideally suited for the role. If anyone can deliver on China stocks listed here, he can. So whilst scepticism over the decision to plunge ahead with more China listings now is understandable, there is scope for optimism.