Business

Number of Singapore companies exploring HK IPO 'doubled'

Companies here mulling moves to list on Hong Kong's stock exchange

The competition between the Singapore Exchange (SGX) and the stock exchange of Hong Kong for listings looks set to intensify as more companies here mull over moves to head to the Republic's rival to raise capital.

Market watchers said this reveals that a growing number of companies are hoping to deepen their business presence in the Greater China market, but these moves are not a guaranteed success.

As Osim prepares its initial public offering (IPO) in Hong Kong as V3 Group, news emerged earlier this month that Pan-United Corp is spinning off its Chinese port division for a Hong Kong listing, while LHN said it is eyeing a dual primary listing there.

Both SGX-listed, Pan-United is Singapore's largest ready-mixed concrete and cement supplier, and LHN is a real estate management firm.

The number of Singapore companies exploring a Hong Kong IPO has "doubled", according to PwC.

"Looking at our pipeline, I would say, over the past 12 months, the number of Singapore companies considering a Hong Kong IPO has doubled to over a dozen," PwC capital market services leader Tham Tuck Seng said.

"They are a mixture of SGX-listed firms and private companies mainly in the manufacturing and trading sectors.

"They are choosing Hong Kong because they are setting up factories in China or trying to penetrate that market.

"So Hong Kong makes more sense because being there gives them better brand visibility and consumer trust in their target market."

Osim, which was delisted from SGX last year, operates some 172 stores in mainland China and 35 in Hong Kong, compared with just 26 here.

Company head Ron Sim is also said to be unhappy about the valuation levels on the SGX.

In the first quarter of this year, the Hong Kong stock exchange mainboard had 21 newly-listed companies and HK$13.4 billion (S$2.4 billion) in equity funds raised.

The SGX mainboard had only one - Dasin Retail Trust's $121 million IPO.

But DBS capital markets head Eng-Kwok Seat Moey does not see a win-lose competition between the two.

Mrs Eng-Kwok said: "I do see a rising trend of corporate M&As (mergers and acquisitions), but any delistings - which are inevitable in the case of full acquisitions - do not mean that there's a preference for Hong Kong.

"In fact if you look at Hong Kong's performance, the funds raised in IPOs last year dropped from 2015, and for the first quarter this year, it's also been half of that in the same period last year. In contrast, Singapore's performance has been improving."

Hong Kong reported 126 IPOs last year but the HK$195.3 billion raised was down 26 per cent from 2015. On the SGX, there were 16 IPOs raising some $1.8 billion last year, up from $339 million in 2015.

Mrs Eng-Kwok expects further recovery: "Last year, DBS did four out of the five mainboard listings and quite a number of Catalist listings on the SGX. This year, (the pipeline) seems just as healthy."

Ultimately, getting listed in either Hong Kong or Singapore will have its share of challenges and opportunities.

Mr Tham said the valuation of a stock is more often the reflection of a company's earnings and business performance, not where it is listed.

He added: "The ones that are looking to go there are mostly medium-sized companies, and the Hong Kong market has a sea of these, particularly in the traditional sectors such as manufacturing, consumer and trade."

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