Merger spells end for foreign listings
Speculation is rife that premium 'foreign' shares could soon be a thing of the past for many of Singapore's 'strategic' listed firms.
Since the government-linked Singapore Technologies group made its surprise announcement in August that it would merge the foreign and local share tranches of a number of its listed firms, pressure has been mounting on other protected blue-chips to follow suit.
Singapore Bus Service has already followed SingTech's lead and scrapped its dual listing, while Singapore Press Holdings, which dominates the republic's print media, saw its foreign share price dive 10 per cent at one stage yesterday, following suggestions it, too, could soon do the same.
Singapore Airlines could be another prospective candidate, as could the republic's big four local banks, DBS Bank, Oversea-Chinese Banking Corp (OCBC), Overseas Union Bank and United Overseas Bank.
The foreign share prices of Singapore Air, OCBC and DBS all suffered yesterday as a new round of rumours spread.
Peregrine Brokerage (Singapore) research head Chia Yew Boon said: 'I would take bets that within 12-18 months all these dual listings will be gone.' Over the years about 12 so called 'strategic' companies have had their shares traded in two tranches as a result of foreign shareholder limits established nine years ago to ensure these companies remained in local hands.
Combined foreign shareholding is not allowed to breach 49 per cent and no individual foreign investor can own more than 5 per cent.
Local shares are restricted to Singaporeans, while foreign shares are open to all.
This has traditionally resulted in foreign shares being traded at a large premium to local shares, due to a wider investor audience, greater liquidity and thus potentially higher demand.
Foreign share premiums have reached more than 100 per cent for some counters.
With liberalisation and Singapore's finance sector competitiveness under review, there is growing market expectation for change.
Vickers Ballas (Singapore) research head Timothy Wong said: 'With Singapore wanting to be more competitive as a financial market, this is seen to be an anachronism.' Mr Chia said: 'Foreign fund managers end up paying more and it is seen as an artificial barrier by some investors. Local investors aren't well served because they find liquidity low. No one really gains from this.' Having two separate listings with two different share prices has proved not only cumbersome, but also costly in terms of capital, as pricing during fund-raising exercises has had to be linked to what local investors have been prepared to pay.
Amid expectations the two types of shares might be merged, the premium foreigners have been prepared to pay has started to tumble as witnessed by yesterday's market fall.
The initiative is said to have come from within the industry, with SingTech directors leading the way with full government support.
A breakthrough came in August when SingTech announced it would use its planned merger of four of its listed companies into a new engineering giant, ST Engineering, to do away with some restrictions on foreign ownership.
ST Engineering would become the republic's largest listed industrial firm, comprising ST Aerospace, ST Automotive, ST Shipbuilding & Engineering and ST Electronic, grouped under a single listing with foreign shareholding limits raised to 11 per cent.
SingTech has removed shareholding limits on two of its listed subsidiaries.
Quizzed about these developments while attending the World Bank-IMF meetings in Hong Kong in September, Finance Minister Richard Hu said dual listings would be done away with once a company was no longer defence-related or in a strategic industry.
'If these companies are no longer critical and not defence-related, they will gradually merge their shares,' he said.
The Singapore Stock Exchange and Monetary Authority of Singapore, meanwhile, have reassured investors they have no intention of compelling banks to merge their shares and any shareholding changes would be left to the respective companies.
