With the small domestic economy limiting the number of significant new listings, the Singapore Exchange (SGX) is angling to join hands with more overseas bourses, and tap and expand the pie together.
On July 22, SGX’s CEO Loh Boon Chye signed a memorandum of understanding (MOU) with Lynn Martin, president of the New York Stock Exchange (NYSE), to collaborate on dual listings of companies on both exchanges and to create new investment products together.
“We have been working with NYSE for a long period of time in a similar way that we do with other exchanges globally,” says SGX’s head of global sales and origination, Pol de Win, in an interview with The Edge Singapore. “We thought it would make sense to formalise [the partnership], given the opportunities that we see ahead,” adds de Win.
Such opportunities, “predominantly”, are to help grow the pipeline of dual and secondary listings on both exchanges. Prior to the MOU, there were already a couple of listings on both bourses.
In April 2020, AMTD International (renamed AMTD Idea Group), already listed on NYSE, was also quoted on SGX, as the first under a dual-listing structure. On July 15, a related entity, AMTD Digital, was also quoted on NYSE. Both companies are controlled by Hong Kong-based AMTD Group, which has businesses ranging from corporate finance to property and investments in fintech start-ups.
Another NYSE-SGX connection was made earlier this year. Nio, a China-based electric car maker, was first listed on NYSE in 2018. It went on to list on the Hong Kong Exchanges and Clearing (HKEX) in March before getting a secondary listing on SGX two months later.
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If SGX can have its way, there are a couple of companies that can help form a more pronounced trend. Sea, an e-gaming and e-commerce giant, is Singapore-based, but has been solely listed on NYSE since October 2017. Together with another high-profile, Nasdaq-listed tech company, Grab Holdings, they have been reportedly repeatedly nudged to fulfill their “national duty” by listing on SGX as well.
Meanwhile, with existing listings having shown the way, subsequent ones will have a clearer playbook to refer to. “The critical path often tends to be the regulatory side of things. We have had discussions with regulators on both sides to make sure that these processes are well-aligned. What makes it easier is we can share information more freely and target potential opportunities jointly,” explains de Win.
SGX’s tie-up with NYSE is also taking place amid the growing need by US-listed Chinese companies to change their trading status in Asia, or seek a dual listing in this region as part of the “home-coming” trend. Just on July 26, e-commerce giant Alibaba Group Holding, with a US primary listing and a secondary Hong Kong listing, announced plans to elevate its status on the HKEX to a primary one by end of the year.
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While easier access to the so-called Stock Connect link between Hong Kong and the Shanghai and Shenzhen exchanges have been cited as a pull factor, there is also a push factor: Many China-based companies have been seeking a hedge against an eventual delisting in the US due to Beijing’s refusal to comply with some auditing rules. In a sense, SGX, as a neutral third party location, offers another hedge.
Pursuit and partnerships
Now, the partnership with NYSE does not mean SGX would be content with sharing listings. There is nothing stopping SGX’s independent pursuit of single primary listings. “I think there are plenty of opportunities for us to pursue in this region, companies that are interested in single primary listings in Singapore,” says de Win.
“But we also know that there is a range of issuers for whom the secondary listing makes more sense, such as companies that are already listed overseas.” One recent example might be Philippines-based alcohol conglomerate Emperador, which started trading on SGX as its secondary listing on July 14. “At the end of the day, a lot of this ultimately is driven by what objectives of a specific issue are,” de Win adds.
In any case, de Win sees the partnership with NYSE as one that can help issuers tap a larger market of investors on both sides of the Pacific as well as increase trading hours, as investors are able to trade during both Singapore and the US time zones.
Furthermore, de Win points out, Asia — more specifically southeast Asia — is growing at a faster rate than the already developed US. For US companies with “meaningful operations” in Asia, the secondary SGX listing is a way to open wider access to markets and investors.
Both exchanges will also be sharing information more freely and making referrals. For instance, there are several Chinese issuers on NYSE that are considering a secondary listing in Asia, and this is where SGX can work with NYSE to identify the issuers and reach out to them. For those companies that have yet to list anyway, the two exchanges can even make a joint overture together for a concurrent dual listing, adds de Win.
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For this class of concurrent dual listings that involve two jurisdictions, the “sequencing” of regulatory review is critical to ensure that regulators in both jurisdictions sign off on their respective prospectus simultaneously, instead of having the companies clear one regulatory hurdle after another with different exchanges. These arrangements require lengthy discussions which are already underway, says de Win.
SGX already has a similar arrangement with another exchange. In May 2018, SGX inked a partnership with the Tel Aviv Stock Exchange (TASE) to grow capital raising opportunities for companies and provide pre-listing support for startups mature enough to take the next big step. However, this SGX-TASE partnership has not seen much activity. Thus far, only two Israel-based companies that are listed on SGX — Sarine Technologies and Trendlines Group — have leveraged this partnership to seek a dual listing on TASE. But of course, NYSE differs from TASE.
New products
As part of the wider-ranging collaboration between SGX and NYSE, new products will be identified and developed for investors too. NYSE is a subsidiary of the Intercontinental Exchange (ICE) that owns more than a dozen exchanges and other related entities that together offer a wide range of trading platforms and investment products such as the ICE Data Indices.
With environmental, social and governance (ESG) very much in vogue, that is another area for SGX and NYSE to collaborate in.
De Win acknowledges that the US market is way ahead compared to Asia in terms of its ESG framework. “When it comes to ESG and passive investment, we have a lot to learn from the US. Formalising our partnership with NYSE allows us to better exchange our best practices in the ESG space and together develop not just products but solutions too,” says de Win.
Exchange-traded funds, or ETFs, are another area of interest. While the focus of the partnership may be to facilitate dual listing of issuers, if this works out well, the duo could seek to create an ETF of equites that are dually listed in both exchanges. They also seek to cross-list ETF products in either exchange.
The duo are looking to support index product development, for which de Win has mentioned that they may create a bespoke index to fit their equities, but nothing specific has been formalised between the two exchanges yet.
Curtain raiser
SGX’s share price, which was at a recent peak of around $12 last July, has been trending down since, as investors become more cautious over the volume trend. SGX has responded in ways that include this tie-up with NYSE, seen by the likes of UOB Kay Hian analyst Llelleythan Tan as “encouraging news”.
“Depending on the success of this initiative, new US dual listings on SGX may revitalise securities daily average traded volume [SDAV] and stem the overall decline in SDAV,” says Tan to The Edge Singapore.
“However, given the lower turnover velocity SGX has, we opine that more SGX companies would dual-list on NYSE than vice versa,” he says. “It remains to be seen which US-listed companies on NYSE would dual-list on SGX.”
Tan, in his July 20 report, upgraded the stock from “hold” to “buy”, with a higher target price of $11.09 from $9.55 earlier. He notes that SGX trading at below its historical P/E ratio mean, which implies an upside from current price levels given how market volatility persists. He expects to see “strong" 2HFY2022 earnings when SGX reports its full year ended June 30 earnings on Aug 18.
Riding on the strong 2HFY2022 momentum, Tan expects “robust contributions” from SGX’s forex and commodity segments, as well as equity derivatives, to continue into FY2023 due to volatile macroeconomic conditions whilst higher treasury income from interest rate hikes are expected to start from 2HFY2023. “With a moderate yield of about 3%, we like SGX for its resilient business model that benefits from global economic uncertainty,” says Tan.
RHB Group Research is also positive on SGX, following its higher-than-expected SDAV from June’s market statistics. Analyst Shekhar Jaiswal has maintained his “neutral” call on SGX with a higher target price of $10.70 from $10.40.
In his July 14 report, Jaiswal notes that his FY2022 estimate for SGX is above the street’s forecast. “We expect SGX to report $640 million in ebitda and $459 million in profit for FY2022 in its upcoming results announcement — higher than the street estimates of $611 million and $438 million. Our revenue estimate of $1.11 billion is also higher than the consensus estimate of $1.09 billion,” says Jaiswal.
