'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.