The exchange aims to attract larger companies to the city-state

SINGAPORE: Singapore Exchange Ltd (SGX) is toughening its listing rules in the wake of a series of accounting scandals at small Chinese firms, hoping stronger corporate governance will attract more large companies to the city-state.

Recent scandals at companies such as KXD Digital Entertainment have dealt a blow to the reputation of SGX-listed companies, coming as stock sales including intial public offerings (IPOs) have tumbled due to turmoil in global markets.

SGX, whose year has been marked by the delay of an up to US$3bil listing by Formula One motor racing and the loss of football club Manchester United's IPO to New York, said the tighter rules would make it more attractive for larger firms to go public in Singapore.

Although the exchange does not generate a lot of revenue from new listing fees, bigger offerings would prop up daily trading volumes, where it gets the bulk of its income.

“Obviously, if you list more bigger companies, it will trade more and that will tend to attract other large companies as a place of listing,” said Kenneth Ng, an analyst at CIMB in Singapore.

Despite the loss of the high-profile Manchester United listing, SGX chief executive Magnus Bocker said there were no plans to make listing rules more flexible to accommodate sports teams or football clubs.

The English Premier League powerhouse is expected to raise US$300mil in New York this month, where it will be allowed to have a dual-class structure of shares.

“There is no way we will compromise the integrity of our market for any brand,” Bocker told a press conference. “We have lost listings because of that.”

Stock sales in Asia ex-Japan, including IPOs and follow-on deals, tumbled 30.4% in the first half of 2012 from a year earlier to US$77.9bil, with IPO volumes down 62%, according to Thomson Reuters data.

But issuance in Singapore had a much steeper decline, down 74% to US$4.7bil in the first half of the year from about US$18bil in the corresponding period of 2011.

Singapore benefited in 2011 from Hutchison Port Holdings Trust's US$5.5bil IPO, the region's biggest share offering of the year.

Under the new rules, to take effect on Aug 10, companies looking to list must have a market capitalisation of at least S$150mil, have made a profit in their last financial year and have an operating track record that stretches back at least three years.

Firms with a shorter operating track record must have a market capitalisation of at least S$300mil, while those with market capital below S$150mil should have made a pre-tax profit of at least S$30mil in the last financial year.

The exchange also said it was planning to increase the proportion of shares made available to retail investors in IPOs.

China's KXD has applied to be wound up after announcing in January this year that it was being investigated by the Singapore police for offences under the Securities and Futures Act.

In another case, China Sky Chemical Fibre Co is being investigated by Singapore regulators and police. The company announced in April that its auditors had resigned. - Reuters