'Risks for S'pore, HK as foreign firms seek to list'

'Risks for S'pore, HK as foreign firms seek to list'

Karl Malakunas, Agence France-Presse, Singapore

Foreign company listings are expected to rise in Singapore and Hong Kong following the end of the SARS crisis but the floats pose risks for both cities' corporate governance reputations, analysts said.

Companies from mainland China, Indonesia and Malaysia will especially be looking to launch initial public offerings (IPOs) in the two cities after the Severe Acute Respiratory Syndrome (SARS) curtailed major regional business plans during the first half of this year, the analysts said.

"This type of activity can only increase because it has been restrained (by SARS)," Political and Economic Risk Consultancy (PERC) managing director Bob Broadfoot told AFP.

"Companies haven't been able to mount road shows, there's been an inability for people to travel so you are going to see IPOs in both these places increase to rapid levels."

While not quite as bullish about a surge in IPOs, GK Goh Brokerage regional economist Song Seng Wun agreed Hong Kong and Singapore were the most attractive cities in the region for public listings because of their geographical locations and financial reputations.

"Singapore is the regional center for Southeast Asia while Hong Kong tends to get the business from China," Song said.

He predicted an increase in Malaysian and Indonesian businesses using Singapore as the conduit for deals through company listings.

A recent PERC survey of expatriates in Asia found Singapore had the best corporate governance reputation in the region, which Broadfoot and Song agreed was a major reason for the city-state's attractiveness as an IPO launch pad.

However, Broadfoot warned some foreign firms were using the city-state's reputation to gain undeserved respectability.

"Many of these companies do not meet Singapore's high standards of corporate governance," Broadfoot's PERC said in its latest Asian Intelligence report.

"Some probably have little understanding of what good governance means and, as tough as Singapore's regulatory and legal system might be, once the managers of these firms start weaving their webs, Singapore offers unfortunate investors very little protection."

The intelligence report said many mainland Chinese companies, as well as Indonesian firms, were intending to list in Singapore in a bid to look more respectable.

"In this sense Singapore is in the same situation as Hong Kong ... the risk is that Singapore might find its carefully groomed image for cultivating an environment with high governance standards is compromised by these opportunists," it said.

Broadfoot and Song both cited the long-running saga of Singapore-based Asia Pulp and Paper (APP), when warning of the risks to the reputations of Singapore and Hong Kong.

APP, a wood and pulp conglomerate controlled by members of Indonesia's Widjaja family, defaulted in 2001 on debts totaling US$9 billion to record the biggest corporate default in the history of emerging markets.

Song said Singapore's reputation would be harmed if there were more crises similar to APP.