More Chinese corporates eyeing deals in Asean, secondary listings on SGX
[SINGAPORE] Chinese corporates are increasingly looking for deals in South-east Asia amid rising uncertainty from US trade policies, said Jason Saw, head of investment banking at CGS International.
Saw expects CGSI will see eight to 10 major deals in the coming months, in its four key markets in Malaysia, Indonesia, Singapore and Thailand, with many of these transactions coming from Chinese and Hong Kong-based companies.
These companies are in the infrastructure, green energy, manufacturing, and healthcare sectors.
'Essentially, our focus is to look for companies that have growth – they're not your old-school economy ideas where growth is in the single digits; a lot of the opportunities we bring are new thematics,' said Saw in an interview with The Business Times.
Particularly in Singapore, Saw said he sees interest from Chinese companies to make secondary listings on the Singapore Exchange (SGX).
'If you have monitored the markets this year, A+H share listings have been very hot... So if we can replicate a bit of that success in Singapore, I think it'll be a very big win,' Saw said.
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He raised the example of Contemporary Amperex Technology (CATL)'s dual listing in Hong Kong and Shenzhen.
A+H share listings refer to Chinese companies that list their shares on the Shanghai or Shenzhen Stock Exchange, known as A-shares, and the Hong Kong Stock Exchange, known as H-shares.
In May, Shenzhen-listed CATL listed in Hong Kong in the world's biggest initial public offering (IPO) this year, signalling strong prospects for Chinese equities despite global market uncertainty.
These Chinese corporates like that Singapore can give them international recognition, and that the SGX is a transparent neutral ground.
They can also have a shorter time to market if they list in Singapore, given that the queue for IPO listings in Hong Kong or mainland China is 'quite long', Saw said.
Deglobalisation
After US President Donald Trump's 'Liberation Day', Saw said he saw rising engagement from corporates, especially from Chinese companies.
The escalation in the trade war between US and China has increased the appetite for diversification, he noted.
Saw said: '(Chinese corporates) seem to understand the need to diversify from the US and into other markets, and South-east Asia is clearly on their radar.'
Chinese companies are also interested in building distribution channels in the region.
Saw said the South-east Asian consumer distribution is 'under appreciated' because the markets are fragmented.
'What they want to do is to export that product out into this region, find local partners and grow the business to cater for the local population – Asean has 600 million consumers; if every head count consumes one item, that's a huge market for each and every Chinese product out there.'
Much of the conversation that he has with Chinese companies also revolves around serving the local markets.
'Beyond capital market equities, we are driving a lot of conversations in terms of foreign direct investment (FDI) as well,' he said.
'Iff anything, the last (few months) taught you that you cannot rely on one country as your end market and you cannot depend on one location as your manufacturing.'
Asean-China growth
For CGSI, Saw sees the biggest opportunities from the growth of China-Asean business relations.
He noted that the securities company has a unique position – it has been present in South-east Asia for decades, yet its parent company is Chinese state-owned brokerage and investment bank China Galaxy Securities.
'Because we are state owned, (Chinese companies) are even more comfortable to work with us to share information and their strategy,' he said.
Nevertheless, Saw said the firm services 'anyone that comes into South-east Asia' – around 90 per cent of its revenue from IPOs today are still intra-Asean.
'We are just starting this journey of people wanting to come to South-east Asia in a more aggressive manner, and there's a lot of sectors that require investments and have growth opportunities,' he said.
In the past two years, CGSI has obtained investment banking business licenses in Indonesia, Malaysia, Singapore and Thailand – allowing it to participate in activities including IPOs, corporate financing and fundraising.
Saw expects China flows will have a greater part to play in the business in the years ahead, given that most deals need time to progress.
'I'm quite excited about the future…because there are deals that we're trying to do now, and if they materialise, that fits into the Asean-China (trend) that we are seeing.'
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