Can Singapore Stock Exchange benefit as Chinese companies seek alternatives to listing


Amid simmering geopolitical tensions between the US and China, Singapore’s stock market could be poised to profit as Chinese companies seek to hedge political risk while retaining access to a large pool of capital. international.


Although it has some 776 listings on the Singapore Stock Exchange (SGX) and is valued at US$622 billion, SGX is relatively small compared to other major exchanges. The total value of all companies listed on the New York Stock Exchange (NYSE) is US$25 trillion, while the top 100 companies listed in the UK are worth over US$2 trillion. In addition, the number of new registrations has been decreasing in recent years; there have been, on average, only 13 registrations per year since 2017.

To reverse this downward trend, the SGX has intensified discussions with Chinese companies seeking alternatives to listing in the US or Hong Kong and hedge against political risk. Additionally, the SGX seeks to attract technology-backed unicorns from Southeast Asia looking to tap into the capital markets. According to Pol de Win, head of global sales and origination at SGX, the exchange could see 30 to 40 first registrations and secondary registrations annually over the next five years.

Political risks in China

The majority of Chinese companies are listed on the three stock exchanges in mainland China: the Shanghai Stock Exchange, the Beijing Stock Exchange and the Shenzhen Stock Exchange. The large and popular Hong Kong Stock Exchange is being integrated in other Chinese exchanges, but has notable differences and generally offers better access to international capital.

However, many Chinese companies have chosen to list outside mainland China. The country has not fully liberalized its capital account and cross-border capital flows are still subject to restrictions and controls. Moreover, the Chinese Communist Party (CCP) has a reputation for closely managing some of the country’s publicly traded companies. For example, in 2020, the CPP halted the initial public offering (IPO) of Ant Group – an organization affiliated with Alibaba. A few months later, the government required several publicly listed education companies to change their status to non-profit organizations. Other emerging market economies, such as Russia and Brazil, have experienced similar issues.

Risks for Chinese listings in the United States

Chinese companies listed overseas, especially in the United States, have faced growing challenges in recent years. In 2021, China introduced several measures to make overseas listings more difficult for Chinese companies under the guise of bolstering national security. According to the proposals made at the end of 2021, the authorities would be power prevent companies from listing overseas if they believe the share sales would threaten national security – the measure likely targets U.S. listings amid growing geopolitical tensions. It’s still to come achievementbut the proposals remain valid.

But developments in the United States are more pressing for Chinese companies already listed on the NYSE or NASDAQ. In December 2020, then-US President Donald J. Trump sign into law the Holding Foreign Companies Accountable Act (the “HFCAA”). The law addresses long-standing government concerns about China’s audit regulations and requires companies to disclose to the U.S. Securities and Exchange Commission (SEC) information about foreign jurisdictions that prevent Public Company Accounting Oversight Board (PCAOB) to conduct audits.

In March 2022, the SEC began publishing a provisional list of foreign listings that the PCAOB is unable to audit. In early April, the China Securities Regulatory Commission offers removing a requirement that said on-site audits of overseas-listed Chinese companies could only be performed by Chinese regulators. No less than 200 Chinese companies are facing radiation unless Chinese regulations change accordingly.

What could this mean for Singapore?

With the tightening of disclosure rules in the United States, the Singapore stock exchange could win back after losing out to other hubs in recent years, partly due to liquidity issues. Electric car maker NIO, which has been threatened with US delisting, made its debut in Singapore without raising funds in May. The company said it would take advantage of “Singapore’s advantageous position as an international hub of innovation and technology” and step up business operations in the city-state.

De Win told Bloomberg that the SGX is in talks with companies in China and Southeast Asia that operate in sectors such as fintech and consumer technology, as well as real estate investment trusts and corporations. blank checks from around the world. Primary and secondary listings targeted by the SGX will likely have a market value of at least S$500 million (US$364 million).

Singapore could also be attractive to black check companies amid tighter disclosure rules in the United States, according to Bloomberg. As of June, three blank check companies had been listed on the stock exchange this year. Meanwhile, the region is becoming a hub for billion-dollar tech-backed companies. Many of these companies may soon seek to enroll in the technology and innovation cluster.

However, IPO activity has been weaker than expected this year amid turmoil in global markets caused, in part, by Russia’s invasion of Ukraine, but also, more specifically, in the region, such as the unpredictable shutdowns in China. De Win expects activity to pick up again towards the end of 2022, adding that “it is very rare for markets to remain closed for three quarters in a row because, at the end of the day, people need access to cash”. He noted that the SGX pipeline is stronger than it has been in a long time.

Dual Listing Agreement

In a recent but relevant development, SGX said he was working with NYSE to dual-list companies on both exchanges. The development would allow investors to tap overseas investment opportunities on the two major stock exchanges, similar to moves already developed with the London Stock Exchange (LSE).

“Dual listing between the NYSE and the SGX Group benefits issuers by allowing them to tap into pools of capital in key markets outside of their home regions,” the two exchanges said.

Alternative Ads Abroad

Singapore is not the only option for Chinese companies looking to hedge political risk. The Hong Kong Stock Exchange is a major international stock exchange, allowing companies to tap international capital while providing access to Chinese investors. Companies with a dual principal listing in Hong Kong can to apply to be included in the stock connect. It is a real-time link to the city’s stock exchange that makes it easier for mainland Chinese investors to buy stocks.

The Zurich-based SIX Swiss Exchange is another alternative, albeit a long way from China and the ASEAN region. At the end of July, four Chinese companies became the first to publish shares in Switzerland via a China stock connect program. The companies have raised approximately US$1.5 billion. According to CNBC, 10 companies listed in China plan to offer shares in Switzerland following the introduction of the new Stock Connect program.

London is another option, being the oldest and most international of all stock exchanges in the world. Some $4 trillion worth of stocks are listed on the stock exchange. The LSE has already tried to improve Chinese companies’ access to the British stock market. The Shanghai-London Stock Connect program seen four transactions and over $5.8 billion in volume in 2019 and 2020. The program allows companies from both exchanges to list on the other exchange. However, while Chinese companies can raise new capital, UK-listed companies are only allowed to issue Chinese certificates of deposit (CDRs), which are backed by existing shares.


About Us

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and has offices throughout ASEAN, including Singapore, Hanoi, Ho Chi Minh Cityand Da Nang In Vietnam, Munichand Essen in Germany, Bostonand Salt Lake City in the USA, Milano, Coneglianoand Udine in Italy, in addition to Jakartaand Batam in Indonesia. We also have partner companies in Malaysia, Bangladeshthe Philippinesand Thailand as well as our practices in China and India. Please contact us at [email protected] or visit our website at www.dezshira.com.

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