Singapore is World's Fastest Growing IPO Market
Date: 08-Jul-03
Country: SINGAPORE
Author: Katherine Espina
It has the feel of a boom about it.
This week alone, three companies debuted on the city-state's stock exchange, including Malaysian sewage and water treatment firm Eco Water Ltd. It bolted 134 percent above the issue price on its first day, making it front page news in a nation of active small investors eyeing a quick trading profit.
Singaporean plastic parts maker Juken Technology closed its first day's trade on Friday 36 percent above its issue price after its IPO was 35.4 times subscribed.
And it has been hot for most of this year.
In the month of June, nine companies listed. That compares with eight listings for the whole U.S. market in the first six months of 2003, according to Thomson Financial data.
Singapore was the fastest growing IPO market in the world in the first half, with issues growing more than 18-fold to US$566.40 million, the Thomson Financial data shows.
This compares with an 86 percent slump to US$1.89 billion in the United States and a 73 percent fall in Britain to US$1.03 billion.
Singapore ranked eighth in the world by value, but was the world's fourth-biggest by number of issues with 21 IPOs.
It was behind China, which was the world's biggest with US$2.1 billion from 33 IPOs, but easily outpaced its more direct regional rivals -- in particular Hong Kong.
Singapore's reputation as a politically stable nation with high corporate governance standards has helped it attract the foreign listings -- particularly from China -- it needs to grow.
"Hong Kong has a reputation for being somewhat more speculative. There is less political risk in Singapore," said Jay Ritter, an IPO expert and professor of finance at the University of Florida, in explaining Singapore's attraction.
IPO issuance in Hong Kong in the first half crashed 77 percent to US$157.6 million from 18 IPOs.
'BIG FISH, SMALL POND'
Goh Chyan Pit, DBS Bank managing director, equity capital markets, said there has been a limited number of foreign companies in Singapore and the scarcity factor appealed to would-be issuers.
"It's being a big fish in a small pond. They're likely to receive greater attention from the investing community." The Hong Kong-based Political & Economic Risk Consultancy said companies were also drawn to Singapore because they wanted to be associated with the country's stricter regulatory system.
"Simply being listed in Singapore has an air of respectability about it, the implication being that such a company meeting the tough scrutiny of the Singapore authorities must somehow be a safer investment bet than companies listed in markets elsewhere with less spit and polish," it said.
For instance, in reviewing a listing application, the Singapore Exchange puts more emphasis on the management's integrity and controlling shareholders than size of the company.
The Monetary Authority of Singapore may serve a stop order on an issuer when the offer is in progress if it believes offer documents contain a misleading statement.
TOUGH APPROACH APPEALS
Foreign firms are drawn to this tougher approach.
Of the 24 firms that have launched IPOs so far this year, two were based in China and one was Malaysian, raising around S$106 million ($60.29 million) or 11 percent of total proceeds. China-based bottle maker Full Apex (Holdings) Ltd's raised S$84.2 million in its offering, making it second biggest to Singapore Post's S$684-million IPO.
The growth in IPOs has tracked a rebound in Singapore's stock market sparked by the end of an outbreak of SARS late in May. The main Straits Times index has surged 10 percent since May.
FEAR GOVERNANCE MAY SUFFER
But accompanying any boom is the worry it could be too good to be true. Some are concerned that companies with poor standards could slip through in the rush.
"As an international financial center, all sorts of companies would be attracted to tap the Singapore capital market, local or foreign, good or bad management," said Goh.
But he