CAPITAL market regulators of three countries, namely the Securities Commission Malaysia (SC), the Monetary Authority of Singapore, the Singapore Exchange and Thailand’s Securities and Exchange Commission, signed a memorandum of understanding to establish a streamlined review framework (SRF) for the Asean common prospectus last week.

This is considered another milestone on the road towards an integrated regional capital market. It is also a step forward in paving the way for the cross-listing of companies on the three stock exchanges.

The SRF for the Asean common prospectus will help expedite the listing process and broaden access to capital markets in the three countries.

The framework will allow the securities regulators to better coordinate among themselves, and companies that intend to float shares in the three bourses will only need to deal with the home regulator for the prospectus review process. Theoretically, this process will be much simpler, which in turn will encourage companies to consider the option of cross-listing.

Ideally, the review of applications will be completed at the same time, which is within three to four months from the date of submission. The time taken to obtain approvals may also be shortened under the new framework.

In a nutshell, there will be just one set of initial public offering (IPO) requirements to float shares in the exchanges in Bangkok, Singapore and Kuala Lumpur.
A company planning a cross-listing would only need to prepare one set of prospectus that complies with the Asean Disclosure Standards, instead of the different guidelines of regulators in the three countries.

Under the current framework, the proposal has to be submitted to the regulators in the different countries. But, most of the time, each regulator will grant approval at different times, mainly due to the differences in the frameworks.

As for companies seeking listing only at home, the procedure will remain the same.   

Such an integrated framework for cross-listing is probably the first of its kind in the world. This will broaden companies’ access to a bigger capital market for their financial needs.

Nonetheless, some quarters believe that many issues need to be ironed out for a proper framework, considering the differences between the three exchanges — for instance, listing requirements, standard of information disclosure and corporate governance compliances.

There could also be challenges when it comes to implementing the new framework, as well as resolving the differences on listing requirements and corporate governance.

The Edge understands that the current focus of the SC and its counterparts is on streamlining the requirements for IPOs and prospectus launching, instead of the post-listing requirements.

At the signing ceremony, SC chairman Datuk Ranjit Ajit Singh said the other Asean member countries are also keen to participate, noting that Indonesia and the Philippines are prepared to come on board by the end of this year.

The new framework is expected to be implemented by 3Q2015, together with the issuance of a handbook on various administrative and procedural matters.
It is worth noting that the Asean Trading Link, which was launched in September 2012, is to electronically connect exchanges in Malaysia, Singapore and Thailand.

This initiative is seen as more of a benefit to investors, whereas the SRF will benefit the issuers as it creates more opportunities for fundraising.

RHB Investment Bank Bhd director and regional head of equity capital markets Gan Kim Khoon tells The Edge that the different listing requirements are not an impediment to regional integration, and it is unreasonable to expect every exchange in the world to have identical listing requirements.

“I think what is more important or relevant to the retail investor is the disclosure requirements in the prospectuses. That said, I don’t think the disclosure requirements in Singapore and Thailand are significantly different from ours, especially if there is an international offering circular,” he says.

Gan notes that under the current regulations, there is limited access to IPOs in other bourses. Usually such IPOs are made available to only high-net-worth individuals and institutional funds.  

The Asean Trading Link, he says, is merely a platform to ease the process for investors to buy and sell shares on the regional exchanges.

He adds that the SRF covers only prospectuses and does not state that the exchanges must have identical listing requirements such as quarterly reporting and board composition.

Corporate finance advisory and consulting service firm Astramina Advisory Sdn Bhd managing director Wong Muh Rong opines that the SRF is a good starting point to streamline trading and the rules and regulations.

“Guidelines for prospectuses are probably one of the most straightforward sections among the various jurisdictions. They have many similarities, as prospectuses deal with disclosures and compliances,” she explains.

Wong, however, says the goals may take years to achieve. “I foresee a lot of hurdles. Hence, the SC has to start on something like streamlined prospectuses to enhance the reach of the investor on the street outside Malaysia.”

Malaysia is expected to have a wider reach of retail investors in Thailand and Singapore, followed by Indonesia and Vietnam, when the prospectus framework is further streamlined, she adds.

Meanwhile, Hong Leong Investment Bank Bhd dealer representative Frank Lin acknowledges that with the challenges ahead, the aim of regional integration and increased cross-participation is not easy to achieve.

“The different exchanges will need to iron out the differences to make the SRF work. For corporate governance issues, we just have to rely on the integrity of international accounting firms,” he says.

However, Lin is of the view that a more streamlined approach will reduce cost and benefit issuers, especially when the amount of money to be raised is substantial.

While the capital market regulators and exchanges of Malaysia, Thailand and Singapore have an ambitious plan, it remains to be seen if the new framework can excite the IPO market and spur the demand for cross-listing.

This article first appeared in The Edge Malaysia Weekly, on March 9-15, 2015.

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