S-chips: 'Retail investors will follow the big boys'

Wary retail investors could regain interest in scandal-hit China firms listed here if institutional and other large investors show the way, said an OCBC Bank investment banker Monday.

Singapore may play host to more listings of China firms following a framework set up between Singapore and Chinese regulators last week.

"The retail (investors) suffered because of the past incidents, but interestingly we are getting more and more enquiries from institutional funds" about China firms, said Ms Tay Toh Sin, head of corporate finance at OCBC Bank.

"Everybody is looking for North Asia to outperform South- east Asia," she said, noting at a briefing that Hong Kong-listed China stock did well recently.

"The retail will take the cue from the big boys. If large institutional (investors) start to look at that space, the retail will follow."

There are about 140 China stocks listed in Singapore, or S-chips, and many made their debut before the 2008 financial crisis. But the crisis uncovered accounting and governance failures at many of these firms, denting investor confidence.

Last week, the Singapore Exchange said it will work with the China Securities Regulatory Commission (CSRC) to vet new listings. Ms Tay raised the possibility of regulators here discussing the issue with CSRC and working with them if there are further scandals. "There is at least a formal channel. Whether it's effective or not, it's yet to be seen - nothing is legally enforceable - but at least it provides a certain framework and mechanism."

She said the framework could attract China firms to tap the Singapore equity market for funds, as steps by Beijing have driven up interest rates in the mainland. China on Saturday hinted at the end of a 14-month ban on initial public offerings (IPOs) but there is still a big queue of firms wanting to list, and some could move here.

Ms Tay said the earliest the market will see an S-chip listing under the new framework will be late next year - for those already prepared to list. Firms now deciding on a Singapore IPO will arrive in 2015 at the earliest.

She expects the IPO market next year to outdo the US$5.03 billion (S$6.3 billion) raised this year. The oil and gas sector should do well for 2014. Real estate investment trusts should have a strong first quarter but may then slow down.

Mr Tan Kee Phong, OCBC's head of capital markets, expects the issue of corporate debt to exceed this year's $19 billion to $20 billion. "I expect foreign (bond) issuers to make a comeback."

He added that they could be from Europe, Hong Kong, mainland China, Indonesia or India.

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