Quality and pricing in initial public offerings matter

THE evolution of the initial public offer (IPO) market in Singapore makes for an interesting study. In the 1970s and 1980s, the priority was to list mostly local companies, the rationale being that IPOs were primarily capital-raising exercises which would then enable promising firms to obtain much-needed financing for growth.

This gelled with the view of the stock market as the economy's link to the future, channelling scarce resources to their most productive uses and functioning as a tool to benefit local small and medium-sized enterprises (SMEs).

In the late 1990s, following the abrupt withdrawal of Malaysian stocks traded on Clob International, the priority shifted to filling the void thus created as quickly as possible. To coincide with a national imperative to "go regional", the need to rebuild mass then led to the rapid entry of mainly foreign companies, the majority from China.