SINGAPORE - It is a very rare event, surely, that a stock exchange's largest company does not register a trade for more than a month.
But that is precisely the quagmire that the Singapore Exchange (SGX) finds itself mired in with British insurer Prudential.
The stock trades actively in London and New York but barely registers a yawn on its Singapore secondary listing. The last successful SGX transaction was on April 24.
Trades on that day bumped up Prudential's value by 27 per cent and allowed it to leapfrog longstanding bourse leader SingTel to be the largest company in Singapore.
SingTel, a popular retail and institutional stock, contributes vastly more to market activity but number crunchers do not care. At the end of last month, SingTel's market capitalisation of $62.14 billion remained below Prudential's $63.859 billion.
Prudential encapsulates the quandary that the SGX faces over secondary listings - they look good on paper and may dramatically lift the value of the market but do not really contribute much else.
This has come in the spotlight after the SGX on Wednesday said it will codify its regulations into a framework for secondary listings to make the rules clearer to all.
Secondary listings have their stock quoted in a primary listing in their home market - in charge of most of the regulation - but have their shares also listed and traded elsewhere, such as in Singapore.
Under the SGX proposal, companies from developing markets would be subject to more continuing listing requirements. The SGX would apply a lighter touch to those from developed markets, relying more on the home bourses for regulation.
The bourse operator has said the change is more to clarify regulations than to attract more companies to Singapore.
Mr Mohamed Nasser Ismail, SGX's head of issuer regulation, on Wednesday said the regulatory framework has been "a long time in the making", and there is no link with any listing.
But market watchers say the regulatory framework will, in effect, make it easier for global companies to seek a secondary listing and there is little doubt that secondary listings form a part of the SGX's plans to boost its securities market.
After all, what's not to like about having the world's most famous companies listed here. Their presence - even as secondary listings - add glitz and glamour.
It is an apt coincidence that the regulatory announcement comes just slightly after news that Russian's Gazprom, the world's largest producer of natural gas, is exploring a secondary listing here.
But judging from history, big names such as Prudential and possibly Gazprom will probably not add much to market activity, although their impact on the value of the bourse is oversized.
There are 33 secondary listings and many of them do not register a trade on any typical day. Yet these firms made up $311.225 billion of the $1.012 trillion worth of securities listed here - or over 30 per cent of the total market's value.
The more active counters include the three secondary-listed Jardine stocks on the benchmark Straits Times Index - Jardine Matheson Holdings, Jardine Strategic Holdings and Hongkong Land Holdings.
Even then, SGX data shows the turnover of these three stocks was only about 2 per cent of the total trading value of securities last month. This is low considering that their combined month-end value of $124.9 billion was about 12 per cent of the overall market total.
In fact, the secondary listings market bears some resemblance to the market for American Depository Receipts (ADRs), which is facing even more dire straits.
In 2010, SGX introduced the ADRs of some China companies listed in New York, to much fanfare. The idea was that investors would be able to trade in the companies' stock during Asian hours when the companies themselves were doing business, rather than wait for New York to open.
As China stocks go, the ADRs here are the bluest of the blue chips. There is Internet giant Baidu, China's biggest oil producer PetroChina, and China Mobile, the world's largest mobile phone operator by subscribers.
But trading activity of the ADRs here is painfully thin, and most days pass by without any transaction being completed in a single ADR.
There are some differences between ADRs which are merely "quoted" here and secondary listings. But the sales pitch to investors is still the same - trade the world's largest companies on the SGX. And the impact has, unfortunately, been similar as well - a boost to prestige but not much help to trading activity.
One possible reason for the malaise is that the trading activity invariably centres on the home market, where the interest is higher.
Although Prudential's listings in Western markets are doing well, its Hong Kong counter is almost as dead as the SGX one. Most days, Prudential trades only 2,000 shares or less in the territory.
On the bright side, however, there is no need to panic - SGX's derivatives business has grown nicely in recent years, for instance. There has also been a suggestion to cut the lot size for corporate bonds and list them so retail investors can trade - an idea that may yet prove profitable.
The SGX must be commended for its hard work in coming up with the latest regulatory framework but it really shouldn't be looking to secondary listings if it wants to boost the market. Just look at Prudential. The man in the street probably doesn't even know that it is listed here.
This article was first published on June 6, 2014.
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