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Taiwan bank bullish on anaemic GEM

Samuel Yeung

The Growth Enterprise Market (GEM) ended the week at 190 points on Friday, down 80 per cent on its high of 1,021 in March last year.

But the poor performance of the exchange has not dampened Core Pacific-Yamaichi Capital's interest in it.

'I think that now is the best time for us to strengthen our leading position in the market,' executive director D.C. Lee said.

The company has been an aggressive player in the GEM market over the past 12 months. Since January, it has sponsored the listing of six GEM companies - Cheungdu Top Sci-Tech, Jiangsu Nandasoft, Rojam Entertainment, Goldigit Atom-tech Holdings, BM Intelligence International and Sing Lee Software (Group).

The Taiwan-based investment bank has become the leading underwriter in the GEM's primary capital market, not only in terms of the number of the companies it has brought to market but in the amount of capital it has helped raised.

Core Pacific's bullishness is at odds with many investment banks that regard sponsorship of GEM companies as a high-risk, low-return business.

Sponsoring risks are higher in the GEM compared with the main board, because of listing rules that assign responsibility to the sponsors to ensure the companies they sponsor continue to comply with regulations after the initial listing.

While the risks are higher, underwriting commissions are lower, given the smaller size of GEM companies compared with main-board stocks.

'We are very selective. We only choose those which have either a proven profit track record or high growth potential for a sponsor,' Mr Lee said.

Unlike many GEM firms still making losses, all Core Pacific-sponsored firms were profitable, he said. The firms chosen were larger ones, Mr Lee said.

However, Core Pacific's aggressiveness also sparked speculation that it might secretly take a large position for their clients.

Mr Lee rejected the speculation, saying it held no shares of any client companies, except Sing Lee Software, which gave three million shares as part of its sponsorship fee.

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