The opening of the China IPO Market, Private Equity Divestments for China Assets and its impact on listings in Singapore.
On 30 November 2013, the China Securities Regulatory Commission (CSRC) announced that is was opening the door to IPOs in China again. Following from this, many private equity investors holding PRC assets have started to consider the potential to exit their China Private Equity Investments by listing their companies either on the Shenzhen Stock Market or the Shanghai Stock Market. However in the past 10 years, out of 9,000 deals done in China, in more than 7,500 cases, most of these Private Equity Firms (PE Firm) are unable to cash out on their investments. See more.
One key reason is that the there is typically a queue of 760 companies in China waiting for approval from the CSRC and typically only 50 would be ready by 2014 and ready for IPOs in China. Following from this, what then is the answer for a PE Firm looking to exit its investment in China? They can go to Hong Kong which has a higher price to earnings ratio and higher liquidity in trading, but in recent times due to the influx of China IPOs, the Hong Kong exchange prefers larger IPO deals to clear. If your company is smaller, then an issuer can consider either going to AIM in London to list or to Catalist in Singapore to list.
Ultimately the question is where the listed company thinks its investors would reside and what risk they prefer. AIM in London lists shares all over the world but we in Singapore tend to think that there are more money managers in Singapore that know how to value stock so if your listed company has a PAN asian footprint, a listing on Catalist or on the main board of the Singapore Exchange would be a good idea.
Thus, given this set of developments, although Singapore stocks may trade at lower price to earnings ratios/multiples, Singapore may be the best place or way for a PE Firm to divest of its PRC assets in the short to longer term.