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Nikkei Markets

SGX plans to drop minimum trading price rule, saving listings

Bourse operator says it has more effective tools to target share price manipulation

  © Reuters

SINGAPORE (Nikkei Markets) -- The Singapore Exchange plans to scrap a contentious requirement for companies listed on its main board to maintain a minimum share price and market capitalization, a relief for as many as 100 firms that face the likelihood of being delisted.

Under the current rules, companies that fail to meet the minimum average trading price of 20 Singapore cents (15 cents) a share and a base market capitalization of S$40 million are given three years to improve their valuations. Those that don't can be forced to delist although they can appeal for more time to meet the minimum criteria.

The 100 companies now on the watchlist were included in stages after the rule took effect in 2015. Together, they account for about 15% of the 700-plus listed companies and trusts on SGX's equities market. The list has some household names such as fashion retailer FJ Benjamin and ornamental fish farmer Qian Hu.

In a consultation paper, SGX said it will stop adding companies to its minimum trading price watchlist pending a review.

SGX also said 68 companies on the list have been profitable in at least one of the past three years while 16 have been profitable for each of the past two years.

"Yet, these companies are subject to delisting by operation of the framework, which results in significant consequences for the company and its shareholders," the bourse operator said.

At a press conference announcing the paper, Tan Boon Gin, the CEO of Singapore Exchange Regulation, the bourse's regulatory arm, said SGX has since developed more effective tools to target suspected share price manipulation, including the suspension of trading accounts involved in suspicious activities.

The minimum trading price rule was introduced in 2015, in the wake of an infamous penny-stock crash when speculators ramped up low-priced shares of several companies. The subsequent collapse wiped out some S$8 billion ($5.9 billion) in market capitalization and dented SGX's reputation as a home for quality listings. SGX's goal at that time was to make it harder for syndicates to manipulate share prices.

According to critics, the minimum trading price rule is hurting prospects for companies on the watchlist.

It "was an arbitrary number but it had very real implications for listed companies," Stefanie Yuen Thio, joint managing partner at TSMP Law, said earlier this year. The reputation of those on the list suffered and they had greater challenges getting support from lending banks, she said.

FJ Benjamin said recently its low market capitalization was a result of investors valuing its shares at just over half their book value.

SGX's Tan described the consequences for companies on the watchlist as "unintended." Besides banks, these companies also faced problems dealing with potential business partners, he said.

The move to review the rule comes amid greater efforts by the authorities to streamline and improve corporate governance.

While Singapore's blue-chip companies generally score high marks in areas such as disclosure and protecting the interests of minority shareholders, various problems have surfaced among smaller companies, including several recent listings.

For instance, financial technology firm Ayondo had its shares suspended from trading less than a year after it went public, while Eagle Hospitality Trust has faced criticisms about disclosures relating to its initial public offering and one of its largest hotel properties.

Earlier this week, SGX added 36 entities to its fast-track list of companies that will benefit from shorter processing times when they make corporate submissions. The program, which was introduced last year, aims to reward listed issuers with a good history of compliance and corporate governance standards.

Lee Boon Ngiap, assistant managing director of the Monetary Authority of Singapore, said that since 2016, MAS and SGX have introduced many measures "to detect and deter market manipulation in a more focused manner." It is timely for SGX to take stock, Lee said.

Ong Chong Tee, deputy managing director at the Monetary Authority of Singapore, said earlier this month the central bank will strengthen its surveillance of capital markets through better coordination with other government bodies, including the police's white-collar crime unit.

--Kevin Lim

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