Minimum trading price rule pushes 41 firms into SGX watch-list

Minimum trading price rule pushes 41 firms into SGX watch-list

SINGAPORE - Singapore Exchange (SGX) has placed 41 Mainboard-listed companies on a watch-list for failing to meet the new minimum trading price and deferred the assessment of another 69 until September, the market regulator announced on Wednesday after the market closed.

Another two companies were added to the watch-list on Wednesday for failing to meet both profitability and market value requirements.

There are now 76 companies on the watch-list, comprising 41 companies on the list only for trading below the minimum trading price; 19 only for failing the profitability and market value requirements; and 16 for both trading below the minimum trading price and for failing the profitability and market value tests.

The new additions to the watch-list will each have three years to rectify their breaches of the listing requirements, failing which they may be forced to delist.

The companies that were already on the watch-list before Wednesday's announcement are still subject to the older and shorter two-year cure window for the profitability and market value requirements.

SGX has also granted 69 companies a six-month extension and will only assess their trading price in September.

Of those, 10 companies completed share consolidations before March 1 but are still recording a six-month volume-weighted average trading price (VWAP) below the newly implemented minimum of 20 Singapore cents.

Another 29 companies were granted extensions because their six-month VWAP only recently fell below the minimum amid recent market volatility. Yet another 30 companies received extensions after consulting with SGX.

This is the first time that the watch-list includes companies whose six-month volume-weighted average trading prices (VWAP) fall below the newly implemented minimum of 20 Singapore cents. The new requirement was introduced by SGX as an attempt to improve market quality by reducing the vulnerability of Mainboard-listed stocks to manipulation.

Speaking with reporters, SGX head of equities and fixed income Chew Sutat said the new watch-list entrants that were added because of the minimum trading price accounted for 0.3 per cent of the Main board's total market capitalisation, and 0.4 per cent of average daily turnover. All of the companies with a six-month VWAP below 20 Singapore cents, including those that have received extensions, account for about 1.1 per cent or the Main board's market capitalisation, and 1.5 per cent of daily turnover.

Mr Chew noted that about a third of watch list companies eventually exit successfully, based on historical data.

Lawyer Robson Lee of Gibson Dunn welcomed SGX's flexibility in granting extensions to certain companies.

"It is clear the SGX is moving towards and gently nudging mainboard issuers with flaccid fundamentals to improve their business prospects or to seek a new lease of life," Mr Lee said. "I am of the view that the SGX would eventually engender a Main board platform that lists only companies with good prospects and strong market support.

The series of calibrated regulatory actions by the SGX to help weak companies which are able to recover their balance, revitalise and spring-board out of the watch list within a reasonable grace period, is a sensible interim measure."

This article was first published on March 3, 2016.
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