Doubtful benefits of dual listings

Last week’s announcement by Thailand’s Total Access Communication Plc (TAC) that it gained little from a dual listing and intends to de-list from the Singapore Exchange has drawn attention to the perennial debate about this issue.
TAC, Thailand’s second largest mobile operator and majority owned by Norway’s Telenor AS, was listed in Singapore in 1995 but subsequently listed on the Stock Exchange of Thailand (SET) in 2007. Since its listing on SET, trading volumes of TAC shares in Singapore dropped to 1% of total shares last year.
TAC officials said since the company’s principal business activities were in Thailand, it expected a large proportion of new investors to trade its shares on the SET.
This raises the question of whether Malaysia-based companies actually gain from dual listings.
“The strategy of dual listings no longer makes sense because capital markets have become more liquid and integrated and investors more global. The best market to list your company remains the country where your main operations are,” said a research head from a local brokerage.
Malaysia Smelting Corp Bhd (MSC) opted to have a secondary listing on the Singapore Exchange.
The company said the move was “a catalyst for MSC to improve its presence amongst investors in the region (and) provides an avenue to increase the trading activity of MSC shares as well as to provide an alternative market for MSC to raise funds for its working capital purposes.”
While this rationale runs counter to the theory that investments will flow to deserving companies no matter where they are listed, the fact remains that MSC raised an estimated RM100mil from the secondary listing of 25 million new MSC shares in Singapore.
“The question is, couldn’t MSC have done a fund-raising exercise in Malaysia via a rights issue and/or a placement of its shares to the same Singapore investors who bought the Singapore-listed MSC shares?” one market observer questioned.
A fund manager added that stocks listed in the Singapore stock exchange had generally higher liquidity than their peers here.
MSC’s secondary listing in Singapore made it the sole Malaysian company which had a dual listing, after Tanjong plc (which was listed both on Bursa Malaysia and the London Stock Exchange) was taken private by tycoon T. Ananda Krishnan last year.
CIMB Group has started the process of a dual listing in Thailand and expressed interest in having a secondary listing on the Jakarta Stock Exchange.
AirAsia Bhd has also been reportedly seeking a dual listing on a mature market, such as the US or Hong Kong.
A 2008 study by McKinsey & Co revealed that companies from developed markets derived no benefit from second listings in foreign equity markets.
Among its findings was that the trading volumes of dual listed shares of European companies in the US stock market, typically accounted for less than 3% of these companies’ total trading volumes.
It also stated that in an age when electronic trading provides easy access to foreign markets, the argument that foreign listings could give companies a broader shareholder base was no longer valid.
“A foreign listing is not even a condition, let alone a guarantee, for attracting foreign shareholders,” the report said.
(from thestar new)