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PR Newswire
25-07-2011, 06:33 AM
OK, basically what he is saying is business fundamentals triumph over dual listing "fever", which is the view I have been maintaining all this while!
Jul 25, 2011
CAI JIN
Dual listings just a passing fad
By Goh Eng Yeow, Senior Correspondent
FOR those who care to recall, about this time last year it was all the rage for listed companies big and small to seek a dual listing, perhaps in Hong Kong or Taipei.
The process was much the same in every case: Company declares its intention to dual list, traders appear suitably impressed, share price surges despite those grandiose listing plans being far from a sure thing.
A slew of small- and mid-sized companies such as China XLX, Z Obee and China New Town, then quoted only in Singapore, went on to list in Hong Kong while giant Chinese shipbuilder Yangzijiang joined the Taipei exchange, the first mainland company to trade in Taiwan.
But one year on, the allure of a dual listing has faded. What was supposed to be a sure-win investment strategy has instead turned out to be just another passing fad.
There is hardly any talk of further dual-listing efforts among listed firms, even though China plays have underperformed the benchmark Straits Times Index by a wide margin. When regional markets turn quiet, as they have in recent months, company bosses have learnt the hard way that it does not matter where the shares of their companies are traded.
Given the way markets move in lockstep with one another, liquidity is hard to come by, whether in Singapore, Hong Kong or Taipei, if investors across the region display no interest in equities.
One thing is for certain though. Costs escalate if a company maintains more than one listing as it will have to adhere to the many rules and regulations of the different stock markets.
The initial exuberance displayed by overseas investors for Singapore Exchange-listed firms that had made dual listings in their markets has also waned in recent months.
South Korean investors, for example, were badly hurt when SGX-listed fabric maker China Gaoxian was suspended only two months after it made a triumphant debut in Seoul in January, raising $223.8 million from selling 600 million new shares.
There is also no guarantee that a company can keep attracting investor interest in a foreign market beyond the initial listing exuberance.
True, early birds such as China XLX and Z Obee enjoyed a big shot in the arm when their shares made their debuts in Hong Kong.
But in recent months, prices of the SGX-listed and HK-listed shares of these firms are almost identical, dashing hopes traders once entertained of making a quick buck from any arbitraging opportunity that might have arisen from the dual listing.
What is also interesting is that the affection shown by local investors to dual-listed firms has proven to be far more enduring than the fleeting interest displayed by their counterparts overseas.
In the second quarter, China XLX attracted a daily average volume of 554,000 shares in Singapore - or roughly twice the average daily number it traded in Hong Kong.
Over the same period, Z Obee's daily average volume here of 7.8 million shares far surpassed the 2.52 million shares that changed hands, on average, each day in Hong Kong.
That effectively kills the argument that SGX-listed firms will enjoy higher liquidity on an overseas bourse because investors in Singapore are not interested in trading them here.
Another reason often cited by companies choosing to go down the dual-listing route is the higher valuation they can get from overseas investors.
But China XLX and Z Obee have both fallen sharply in price since they made their Hong Kong debuts more than a year ago.
It is a reflection that business fundamentals and market sentiment are more important factors in determining whether a stock does well.
Therefore, rather than resorting to gimmicks like getting a dual listing to give their flagging share prices a boost, bosses need to tackle the challenges confronting their businesses that had caused investor interest to wane.
Take Yangzijiang. Its Taiwan depository receipts (TDRs) attracted a roaring trade of 1.43 million units when they debuted last September. But by last month, daily average volume had fallen by almost half to 740,000 TDRs. Worse, having a dual listing failed to stop the deluge of sell orders last Monday when the shipbuilder was rocked by concerns over its exposure to Europe's debt crisis.
Nerves were calmed only after management assured jittery investors that there was no immediate plan for a convertible bond offering and that the shipbuilder was taking steps to reduce its reliance on European customers.
The shares here jumped 14.6 per cent between last Tuesday and Friday, while the depressed TDRs enjoyed a 10.5 per cent lift in Taipei.
It is a stark reminder to listed firms that what appeals to investors is business fundamentals.
If a company has an alluring business to attract investors, it hardly matters if it is listed in one or more markets.
engyeow@sph.com.sg
Jul 25, 2011
CAI JIN
Dual listings just a passing fad
By Goh Eng Yeow, Senior Correspondent
FOR those who care to recall, about this time last year it was all the rage for listed companies big and small to seek a dual listing, perhaps in Hong Kong or Taipei.
The process was much the same in every case: Company declares its intention to dual list, traders appear suitably impressed, share price surges despite those grandiose listing plans being far from a sure thing.
A slew of small- and mid-sized companies such as China XLX, Z Obee and China New Town, then quoted only in Singapore, went on to list in Hong Kong while giant Chinese shipbuilder Yangzijiang joined the Taipei exchange, the first mainland company to trade in Taiwan.
But one year on, the allure of a dual listing has faded. What was supposed to be a sure-win investment strategy has instead turned out to be just another passing fad.
There is hardly any talk of further dual-listing efforts among listed firms, even though China plays have underperformed the benchmark Straits Times Index by a wide margin. When regional markets turn quiet, as they have in recent months, company bosses have learnt the hard way that it does not matter where the shares of their companies are traded.
Given the way markets move in lockstep with one another, liquidity is hard to come by, whether in Singapore, Hong Kong or Taipei, if investors across the region display no interest in equities.
One thing is for certain though. Costs escalate if a company maintains more than one listing as it will have to adhere to the many rules and regulations of the different stock markets.
The initial exuberance displayed by overseas investors for Singapore Exchange-listed firms that had made dual listings in their markets has also waned in recent months.
South Korean investors, for example, were badly hurt when SGX-listed fabric maker China Gaoxian was suspended only two months after it made a triumphant debut in Seoul in January, raising $223.8 million from selling 600 million new shares.
There is also no guarantee that a company can keep attracting investor interest in a foreign market beyond the initial listing exuberance.
True, early birds such as China XLX and Z Obee enjoyed a big shot in the arm when their shares made their debuts in Hong Kong.
But in recent months, prices of the SGX-listed and HK-listed shares of these firms are almost identical, dashing hopes traders once entertained of making a quick buck from any arbitraging opportunity that might have arisen from the dual listing.
What is also interesting is that the affection shown by local investors to dual-listed firms has proven to be far more enduring than the fleeting interest displayed by their counterparts overseas.
In the second quarter, China XLX attracted a daily average volume of 554,000 shares in Singapore - or roughly twice the average daily number it traded in Hong Kong.
Over the same period, Z Obee's daily average volume here of 7.8 million shares far surpassed the 2.52 million shares that changed hands, on average, each day in Hong Kong.
That effectively kills the argument that SGX-listed firms will enjoy higher liquidity on an overseas bourse because investors in Singapore are not interested in trading them here.
Another reason often cited by companies choosing to go down the dual-listing route is the higher valuation they can get from overseas investors.
But China XLX and Z Obee have both fallen sharply in price since they made their Hong Kong debuts more than a year ago.
It is a reflection that business fundamentals and market sentiment are more important factors in determining whether a stock does well.
Therefore, rather than resorting to gimmicks like getting a dual listing to give their flagging share prices a boost, bosses need to tackle the challenges confronting their businesses that had caused investor interest to wane.
Take Yangzijiang. Its Taiwan depository receipts (TDRs) attracted a roaring trade of 1.43 million units when they debuted last September. But by last month, daily average volume had fallen by almost half to 740,000 TDRs. Worse, having a dual listing failed to stop the deluge of sell orders last Monday when the shipbuilder was rocked by concerns over its exposure to Europe's debt crisis.
Nerves were calmed only after management assured jittery investors that there was no immediate plan for a convertible bond offering and that the shipbuilder was taking steps to reduce its reliance on European customers.
The shares here jumped 14.6 per cent between last Tuesday and Friday, while the depressed TDRs enjoyed a 10.5 per cent lift in Taipei.
It is a stark reminder to listed firms that what appeals to investors is business fundamentals.
If a company has an alluring business to attract investors, it hardly matters if it is listed in one or more markets.
engyeow@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
