SGX and Nasdaq seal pact to streamline secondary offerings
Partnership comes as Sino-US tension pushes Chinese companies away from Wall Street
The Singapore Exchange has sealed a pact with Nasdaq to streamline dual listings for companies on both stock markets, as the Asian bourse seeks to offset the impact of delistings and governance scandals on its equities business.
SGX said the revised framework for the partnership would facilitate share offers in Singapore by Nasdaq-listed companies by allowing them to base applications for a secondary listing on US regulatory filings.
The agreement comes as rising tension between Washington and Beijing has prompted a number of US-listed Chinese companies, faced with legislation that could force them to delist from Wall Street, to undertake secondary share offerings in the rival Asia financial hub of Hong Kong.
Lock Yin Mei, a partner at law firm Allen & Overy, said the partnership would make the listing preparation process and regulatory clearance “much quicker and more efficient. This benefits issuers and the professionals, making time to market a lot faster”.
However, analysts said the arrangement was unlikely to have much impact on the exchange’s listings pipeline, which in recent years has been dominated by a steady drumbeat of delistings. Shares in SGX were down 1.5 per cent on Wednesday.
Ngoh Yi Sin, an analyst with CGS-CIMB Securities, said a far bigger barrier to secondary listings by tech groups in Singapore was that valuations in the city-state were unlikely to be as high as those commanded in Hong Kong or New York. The revised arrangement with Nasdaq “isn’t likely to change much [for SGX] in the near term”, she said.
SGX is the world’s third-largest foreign exchange trading hub after London and New York, and is planning aggressive expansion in currency markets over the next five years to solidify its position in Asia.
But its equities business has failed to keep pace with growth in Hong Kong. Nine companies have dropped off the Singapore Exchange this year as of June while just five have listed, according to Dealogic data, putting SGX on track for a second straight year of more departures than debuts.
Neither a previously agreed tie-up with Nasdaq to encourage secondary listings nor a separate similar agreement with the Tel Aviv Stock Exchange has produced any offerings in the city-state.
As a result SGX has struggled to capitalise on growing concerns over Hong Kong’s future as a financial centre, sparked by Beijing’s imposition of a sweeping national security law on the Chinese territory.
Years of delistings and governance scandals at Singapore-listed companies have taken a toll on investor enthusiasm, and industry experts say poor liquidity and low valuations have undermined SGX’s appeal.
Hong Kong’s stock exchange even managed to snatch a key derivatives licensing agreement from Singapore for options contracts based on MSCI equities indices. SGX warned that the loss of that agreement would dent its 2021 profits by as much as 15 per cent.
However, SGX’s purchase in June of a controlling interest in BidFX, a trading venue used by hedge funds and banks, could offset some of the lost revenue from the MSCI deal, Ms Ngoh said.