MTP rule - a move in the right direction

Lim Soon Hock

Managing Director

PLAN-B ICAG Pte Ltd

THE introduction of a 20-cent minimum trading price (MTP) for Singapore stocks by SGX would enhance the quality of Mainboard-listed Singapore companies and weed out those which have been underperforming for longer than necessary.

As many of the penny stocks are at rock-bottom prices and cannot go down further, these under-performing companies are over-valued. When such counters are consolidated to meet the MTP, we would see drastic price corrections to reflect more accurately the companies' valuations. Such companies would again run foul of the MTP requirement, unless a sustainable turnaround plan is in progress.

For companies that do not have any, they should move to the Catalist side to preserve their valuations. This should take precedence over the choice of exchange to list. Shareholders would appreciate this. When making this transition, such companies buy more time to improve their performance, either through a turnaround plan, M&A or reverse takeover. They can always return to the Mainboard when growth and…