Friday 29 Mar 2024
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KUALA LUMPUR (Sept 17): Initial public offerings tumbled in the wake of the global financial crisis to 14 in 2009 – the lowest since the super bull-run days of the 1990s. That same year, foreign IPOs were introduced to the local bourse, with the first being XingQuan International Sports Holdings Ltd.

Seven years since Xing Quan’s debut on Bursa Malaysia, 10 other foreign companies have floated their shares here – all China-based ones – although the plan was to draw companies from various countries.

What’s troubling, however, is six of the 11 have seen either a slew of accounting problems or corporate developments that have made investors wary, wrote The Edge Malaysia''s executive editor Kathy Fong in the publication's cover story, 'The China IPO Saga', for the week of Sept 19 – Sept 25.

What went wrong? And how did the black sheep manage to slip through the gates?

Both the Securities Commission Malaysia (SC) and Bursa Malaysia told the weekly that stringent rules and requirements are in place to ensure the quality of IPOs on the local stock market.

“The regulator, in considering and approving listing applications of companies (including foreign-based companies), applies stringent admission criteria to ensure the companies listed on Bursa are of certain minimum quality,” Bursa said on whether it is getting companies that have been rejected elsewhere.

To ensure compliance of the foreign companies with the listing requirements, Bursa said it has regular engagements with audit committee members, the advisers, statutory auditors and management.

“In our monitoring of the listed companies, where we detect any non-compliance or potential non-compliance with the listing requirements as well as other areas of concerns, Bursa will take the relevant pre-emptive actions and such other actions, which are to engage and investigate where the concern relates to the listing requirements or refer/escalate to the relevant authorities.

“Where there is a contravention of the listing requirements, Bursa will not hesitate to initiate enforcement proceedings and take relevant actions as deemed appropriate under the listing requirements and the law against the errant company and its relevant directors,” it added.

The SC, meanwhile, noted that all IPO applications are subject to a robust review process as a matter of policy. However, the regulator stressed that investors should mind their own risks, and that it’s the duty of advisers – namely investment banks who earn hefty advisory fees from successful IPO applications – to go the extra mile to conduct due diligence and screen IPO candidates.

On that vein, perhaps the blame shouldn’t be placed on the gatekeepers. After all, investors themselves should scrutinise the prospectuses before jumping into any investments. Aren't they the ones who should be the held responsible for their investment decisions? Others, however, may not entirely agree.

Separately, the failure to draw quality foreign IPOs to Bursa remains a concern, given the lack of new local listings. Moreover, there seems to be a trend of Malaysian-based companies venturing abroad to list.

“Some potential IPO candidates whom we have engaged have told us that they may want to be listed elsewhere, not Bursa ... this is happening here,” said an investment bank executive.

The weekly shared that one Malaysian-based logistics solution firm called Worldgate Global Logistics Ltd, headquartered in Puchong, Selangor, had made an impressive debut on the Hong Kong stock exchange just two months ago. Its IPO price was 35 HK cents and the stock shot to a high of HK$6.06. At market close on Thursday, it settled at HK$2.36.

Prior to that, Nirvana Asia Ltd, which was taken private due to its low valuation on Bursa, relisted on the Hong Kong bourse in December 2014. Though the share price has not performed that well, the company is valued at HK$7 billion, many times over what it was worth on Bursa.

Bursa said while it makes efforts at leveraging its strengths to attract new listings, selecting a listing destination – from a company’s perspective – is determined primarily by its business strategy and factors like valuation, composition of investor base and visibility for its stakeholders.

“The current economic backdrop is a challenging one, and despite that, in US dollar terms, Bursa Malaysia has been the top Asean equity fundraising destination in 2014 and 2015. This shows that our efforts in enhancing the attractiveness of Bursa Malaysia as a preferred listing destination is bearing fruit,” Bursa told the weekly.

Meanwhile, more companies are expected to go off shore for listing in the future, while the attempt to draw foreign IPOs does not appear to have reaped the desired results, the weekly wrote.

In related stories by writer Alex Chong, the weekly also looked at the long list of troubles that have cropped up in China-based firms listed here, from the astounding loss of RMB415.7 million (RM252.06 million) over 3.6 million pairs of rejected custom-made shoes from a single client, to the exodus of principal officers.

There were also a couple of qualified opinions and disclaimer of opinions expressed over financial accounts, due to, among others, funds deposited elsewhere that auditors could not determine the validity or recoverability of.

To find out more, pick up a copy of The Edge Malaysia today to find out more. Yes, it can also be downloaded from Apple's AppStore and Androids' Google Play.

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P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

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