TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
Comments
Kenneth Lim
09 January 2015
Ambiguity and red herrings plague an advocacy group’s report that paints a bleak outlook for the Singapore stock market in 2015 and suggests that companies may do better raising capital overseas.
The thesis of the report by the Small and Middle Capitalisation Companies Association (SMCCA) can be summarised thus: 2015 will be a terrible year for the Singapore stock market, so if you have to raise capital or grow your company, think about doing it overseas or through non-equity means.
How did SMCCA come to that conclusion? First, SMCCA reckoned that “GDP in 2015 is thus expected to weaken” as non-oil exports and industrial production show signs of a slowdown.
But a down market in Singapore is not on its own a good reason to go looking for another bourse. The quality of a market, rule of law, currency and other factors matter too. And keep in mind that if Singapore’s trade-heavy economy is not doing well, many other economies will not be too rosy either.
SMCCA also argued that the weak economy aside, the Singapore stock market is facing deep structural problems. It noted that new-listing volumes in Singapore have declined over the past four years, and the average deal size has decreased as well.
“This decreasing trend of total offer size and average offer size of equity IPOs is a concern,” SMCCA said.
That seemed like an odd thing to say for a group that advocates for the interests of smaller companies. After all, smaller average offer sizes suggest that smaller companies are becoming a larger slice of the IPO market.
Asked on that statement, SMCCA president Tan Choon Wee backtracked, saying that it was actually only the total IPO volumes that concerned the association. “Our concern is not the lower average offer size but that while there are claims that IPO numbers are up, the total amount raised in by all these IPOs is not,” Mr Tan said. SMCCA also argued that the weak market will make “conventional” fund-raising difficult for companies. “Alternative” fund-raising methods such as medium-term notes will become more popular, SMCCA said.
Since when did debt become unconventional capital raising? Equity capital costs more than debt - companies would rather take on debt than equity whenever possible. And of course debt has been popular in recent years.
Interest rates have been historically low, making debt financing the clear favourite among companies. But these are all natural market reactions, and extend beyond Singapore. Interest rates are historically low in most other major markets. A company isn’t going to find a different reality when it tries to raise capital somewhere else.
SMCCA also mentioned in the report, more than once, that a “catalyst” is needed to revitalise the Singapore market. Asked to elaborate, Mr Tan said: “The Singapore market now lacks excitement. Excitement is not in more regulation nor more education. It is in allowing market participants to explore innovations and opportunities. New regulations just introduce uncertainties. Police and prosecute should be the regulators’ job. Telling investors how to invest and listed companies how to run their business is not.”
That, in essence, appears to be what SMCCA is after. More excitement, no new rules and less education. But will that really serve the interests of Singapore’s listed small and mid-cap companies?
The rules that SMCCA has opposed were raised in the wake of the penny stock collapse in 2013. Bear in mind that it was the smaller counters that were hit in that episode. If anything, the new rules are meant to protect their shareholders.
Has SMCCA forgotten the penny rout? Does it want a repeat? Do away with circuit breakers? Loosen disclosure rules? How can more education for retail investors be bad? And if Singapore Exchange (SGX) does not play that role, who will? Surely not SMCCA, which has a rather rash attitude towards market selection, has a confusing stance on average IPO sizes and views debt as unconventional capital.
Will asking companies to raise capital outside of Singapore really serve the interests of Singapore’s listed small- and mid-cap companies? It is not clear if most small and mid-cap companies feel that same way as SMCCA, which has a membership count of about 30 companies. That is out of 590 Singapore-listed companies with a market cap of under S$500 million.
Let’s hope the other 560 companies are more discerning.