The Singapore Exchange (SGX) has long been a hub for local and international companies seeking to raise capital and expand their investor base.
While many would be familiar with initial public offerings (IPOs), a secondary listing is a lesser-known but equally important avenue for companies.
What Is A Secondary Listing?
Unlike an IPO, where a company offers its shares to the public for the first time, a secondary listing occurs when a company already listed on another exchange also lists its shares on the SGX. This means the company’s shares are traded on multiple exchanges simultaneously, broadening its reach to a wider pool of investors.
The secondary listing may be done in two ways: 1) either through a fund-raising exercise or 2) by way of introduction without any offer for subscription or sale.
SGX evaluates secondary listing applications based on its standards to ensure the company fits its requirements.
However, it leaves the enforcement of rules to the primary exchange’s regulator. Essentially, SGX checks if the company is a good fit for its market while trusting the home regulator to oversee the company’s ongoing compliance with its original listing rules.
For example, a company – ABC Pte Ltd, is primarily listed on the New York Stock Exchange (NYSE). If ABC Ltd decides to list its shares on the SGX as well, this would be considered a secondary listing.
Why Companies Opt For A Secondary Listing On SGX
Companies are often drawn to a secondary listing on SGX to enhance their visibility and branding. SGX’s reputation as a well-regulated and liquid exchange can significantly boost a company’s profile, attracting greater attention from international investors who may not be familiar with the company’s primary exchange.
Another compelling reason is the increased liquidity that comes with listing on multiple exchanges. This naturally leads to increased trading volume, making it easier for investors to buy and sell the company’s shares. Enhanced liquidity can also lead to more accurate pricing of the shares.
Another key benefit is the diversification of the investor base. Secondary listings allow companies to tap into a diverse pool of investors across different regions and risk profiles, reducing their reliance on a single market.
Finally, while no new shares could be issued during the initial secondary listing, it creates a framework for companies to raise capital more easily in the future through follow-on offerings on SGX. This potential for raising capital is a significant motivator for many companies considering a secondary listing.
Examples of Secondary Listings on SGX
A few international companies have chosen SGX as their secondary listing destination. Some notable examples include:
DFI Retail (SGX: D01) – The owner of Cold Storage and Giant supermarkets in Singapore has a primary listing on the London Stock Exchange.
IHH Healthcare Berhad (SGX: Q0F) – A major healthcare provider with a primary listing on Bursa Malaysia. It owns brands such as Mount Elizabeth, Gleneagles, and Parkway.
Emperador (SGX: EMI) – The largest brandy company in the world became the first Philippine Stock Exchange-listed company to have a secondary listing here.
More recently, Helens International (Helen’s), one of China’s largest bar chain networks, debuted on the SGX through a secondary listing (SGX: HLS).
The company, which has a primary listing in Hong Kong, is a familiar name in the bar industry. It has over 500 bars across mainland China and Hong Kong and three branches in Singapore.
Helen’s produces its own branded alcoholic drinks, such as Helen’s draft beer, Helen’s craft beer, Helen’s fruit-flavoured beer and Helen’s milk beer.
Source: Helen’s
For more information on Helen’s, check out SGX’s research on the company.
Benefits Of Investing In Secondary Listings On SGX
Secondary listings present a unique opportunity for investors to access global companies without investing directly in foreign exchanges. This opens up a world of many investment possibilities that were previously out of reach.
Investors also benefit from the increased portfolio diversification that comes with investing in companies listed on multiple exchanges. This can help spread risk and potentially boost returns, creating a more robust investment strategy.
Furthermore, companies with secondary listings are often subject to stringent disclosure requirements, providing investors greater operational transparency. This increased transparency can help investors make more informed decisions, giving them greater confidence in their investments.
Risks For Investors Looking To Invest In Secondary Listings On SGX
On the flip side, investing in secondary listings also comes with its own set of risks.
One primary concern is the regulatory differences between exchanges. Different exchanges have varying regulatory standards and requirements, which impact a company’s operations, financial reporting, and overall governance. Investors need to know these differences and understand how they might affect their investments.
Another risk is the potential for increased market volatility. Secondary listings mean that a company’s shares are subject to market conditions in multiple regions, which can lead to greater price fluctuations.
For example, political instability, economic downturns, or currency fluctuations in one market can spill over and impact the company’s stock price globally. This added layer of complexity can make secondary listings more volatile than domestic-only listings.
How To Invest In Secondary Listings On SGX
If you’re considering investing in secondary listings on the SGX, here are some steps to get you started:
Brokerage account: Open a brokerage account with a company that provides access to the SGX. Ensure the brokerage offers competitive fees.
Research: Conduct thorough research on the company, including its financial health, potential growth opportunities, and risks involved. Understanding the reasoning behind the secondary listing is essential as well.
Investment strategy: Define your investment strategy. Are you looking for growth, income, or something else? Your strategy will guide your investment decisions.
Monitor and review: Regularly monitor your investments and review the company’s performance. Stay informed about market conditions and regulatory changes that might impact the company.
Understanding secondary listings on the SGX can open up new investment opportunities and enhance your portfolio’s diversification. Remember, thorough research and a clear investment strategy are key to making informed decisions and achieving your financial goals over the long term.
Read Also: 4 Low-Cost Chinese ETFs That You Can Invest On SGX
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