Singapore, July 19, 2012 (AFP) - Singapore's stock exchange will impose stricter admission rules for initial public offerings (IPOs) to woo bigger brand name companies to list on its bourse, it said Thursday.
Singapore Exchange (SGX) chief executive Magnus Bocker said the new rules would allow the city-state to capitalise on the anticipated explosion in stock market launches coming to Asia in the next decade given the region's economic rise.
By 2020, Asia is expected to account for 60 percent of the number of IPO's launched globally, up from 40 percent in 2010, SGX statistics showed.
By imposing more stringent admission rules, the bourse hopes investors will be convinced of the veracity and viability of the companies who are allowed to list, making the IPO a safer bet for them.
"I think the primary objective is to say our admission criteria should be higher than most of our peers. That is the starting point," Bocker said at a press briefing.
"I think that will help to attract more mainboard companies."
Under the new rules, taking effect on August 10, companies will only be allowed to list on the SGX if they fall under one of three categories.
First, issuers must have operated for at least three years and recorded a minimum consolidated pre-tax profit of Sg$30 million ($23.9 million) for the latest financial year.
Second, a company must have a market capitalisation of at least Sg$150 million based on the issue price if the firm has been in operation for three years and profitable in its latest financial year.
Should the firm not meet the above two criteria, it can still list if it has generated operating revenue in its latest completed financial year and has a market capitalisation of more than Sg$300 million based on the IPO issue price.
All companies are also required to price their shares at a minimum of Sg$0.50 each.
English football giants Manchester United surprised the market this month when it filed papers to raise cash in the United States, ditching plans to have their public listing in Singapore, which is at the centre of its Southeast Asian fan base.
However, racing franchise Formula One hopes to push ahead with its $2.5 billion listing in Singapore later this year, a source close to the deal said last month.
Other companies the SGX was looking to woo with its IPO admission rules revision included those in the commodities sector such as mining and oil, Bocker stated.
He added that "far more" than 10 companies had pledged to launch their IPOs on the SGX when the new, harsher rules were implemented.