The so-called "direct listing framework" between the SGX and
the China Securities Regulatory Commission (CSRC) announced
yesterday could turn that sentiment around.
It will allow Chinese-owned companies incorporated on the
mainland to seek a listing here once they have obtained the
approval of their CSRC regulators.
That would formalise a very straightforward but unpopular
route for new China firms that want to list here.
The vast majority of the 140 S-chips listed here took a less
direct route. The listed entity is actually a holding company
incorporated in a place like Bermuda or the British Virgin
Islands, which in turn holds the China assets.
This method was very popular as there were no restrictions
before 2006 governing China companies that want to park their
assets under overseas vehicles.
Once the assets were under the foreign holding company,
Chinese owners could then directly apply to list them in
Singapore. This meant they did not have to have dealings with any
Chinese regulator in the initial public offering (IPO) process.
But new mainland rules in 2006, known as "Circular 10",
forced company owners to obtain national and local government
approval - which can be hard to get - before moving assets into
This also had the effect of helping to freeze the pipeline
of S-chip listings - the last time there were significant S-chip
listings here was in 2010.
Companies listing after 2006 could have got the right
approvals or moved their assets abroad before Circular 10.
The direct listing framework will now do away with the need
for offshore holding vehicles.
The process starts with an interested company filing its
application with the CSRC and SGX.
The CSRC will review it before allowing the firm to list in
Singapore. The SGX will conduct a review and green-light the
listing if the firm passes its tests.
"Applicants must comply with all relevant laws and
regulations in China, as well as all requirements and regulatory
standards of Singapore and SGX," said the SGX in a statement
Only Hong Kong has such a formalised programme for China
listings; mainland firms listed in New York, London or Sydney
tend to have gone via the offshore vehicle route.
But in theory any China incorporated company can list
overseas as long as it gets CSRC approval, though this direct
method has been very unpopular.
Only four S-chips chose this path for their IPOs, which took
place between 1995 and 2007.
The direct listing framework announced by the SGX and CSRC
yesterday will publicise this method of listing and likely
smoothen the process.
SGX listings head Lawrence Wong said China companies had
indicated to him previously that they could be interested in
SGX deputy chief regulatory officer Richard Teng said the
regulatory processes and due diligence conducted by the
regulators in both countries "will provide greater assurance to
The change could attract more S-chip listings but industry
watchers questioned if it will help to thaw the listings freeze.
"Chinese companies won't be jumping for joy. They will look
at the example of other companies to see how this works out and
how they manage to list overseas," said Mr Lin Song, partner of
the China practice at RHTLaw Taylor Wessing. He noted that the
process of submitting applications especially in China can be
Mr Peter Choo Chee Kong, the former "IPO king" who helped
many small and mid-cap companies list here in the 2000s,
questioned if investors would want to subscribe for S-chip IPOs
after the corporate governance issues involving some firms. "You
can do whatever you want, but is there demand nowadays?" he said.
"The market is very careful about Chinese companies because
of the problems worldwide."
The new direct listings framework was one of the initiatives
under an agreement for financial sector cooperation, inked
between Singapore and China last month.