Australia's new exchange offers fast track for Chinese firms
SYDNEY Feb 20 (Reuters) - Australia's newest stock exchange launched on Thursday with plans to attract Chinese companies that want to dodge red tape at home and shake off regulatory pressure on valuations, in the latest challenge to ASX Ltd's near monopoly.
Sydney-based Asia Pacific Exchange (APX) hopes to attract Chinese companies by providing quicker listing and a more stable regulatory environment than can be found in Shanghai or Shenzhen, where the process can take years.
Chinese-Australian businessman George Wang, the vice-chairman and driving force behind the new exchange, said he expected to attract 50 listings by the end of next year, up from just two which will debut on the market next month.
"There is a huge market in China for companies who want to raise capital through an IPO," he said in an interview. "We have done information sessions with over 1,000 companies in China."
APX Chief Operating Officer David Lawrence said there was a backlog of listings waiting in China.
"It takes a long time to get listed over there. They can be done quicker over here," he said, adding that an Australia listing offered regulatory stability which could "build confidence" in a public company.
Fears of insider trading in China's IPO market have prompted regulators to tighten control since the China Securities Regulatory Commission (CSRC) let initial public offerings resume in January after a 14-month hiatus. [ID: nL3N0KO36H]
Traders say authorities are concerned the market is being exploited to ensure generous cashouts for insiders, so the CSRC has tightened rules on pricing.
Chen Liangchao, chairman of Australia Samly, a small Shenzhen-based health products maker which will be the first company to list on the APX, said larger Chinese firms were likely to beat a path to Sydney if the initial floats went well.
"We are the first to test this opportunity and a lot of bigger-sized companies are watching us. As far as I know, there are more than 100 companies waiting to list on the APX," he said in a telephone interview.
"You have to wait at least three years to get listed in China, and the process is never clear or transparent."
Samly lodged a prospectus in December to raise A$10 million ($9.03 million) in an initial public offering (IPO) and is expected to debut on the APX early next month.
The other firm in line to list on the APX is Shenzhen-based logistics company Zhong Huan Yun, which plans to raise A$6.6 million also in March. It has been expanding its business to Australia after reaching a deal with Australia Post to help carry mail between the two countries.
Asia Pacific Exchange has opened after a strong recovery in Australia's IPO market, with companies raising a total of A$17.8 billion in the December half, or more than four times the previous year.
The Australian Securities Exchange (ASX) will be watching how the new kid on the block performs after another upstart snatched a slice of its market share over the past three years.
Chi-X, a bourse backed by Nomura, says it has taken about 15 percent of Australia's equities trading market since it opened in 2011 and is handling deals worth about A$250 million a day.
Another new entrant is Financial and Energy Exchange, which was granted a licence last year to offer trading in commodities, energy and environmental derivatives.
The market for yuan-denominated trade could become a key battleground for ASX and APX, both of which plan to offer yuan settlement services in future.
Allowing investors to trade and settle in Australian dollars and Chinese yuan makes it more convenient for Chinese companies to issue debt and public shares in Australia.
It remains to be seen if this will be a significant attraction for Chinese companies and investors. The Hong Kong exchange has offered yuan trading and settling for a couple of years and so far only one company has gone that route.
Analysts were cautious about APX's prospects.
"I don't know if the market is necessarily deep enough ... that it can support much more fragmentation," Commonwealth Bank of Australia analyst Ross Curran said.
Alan Hill, executive chairman of APX-registered State One Stockbroking, said it would be a "wait-and-see deal" for investors.
"We know there is no guarantee. It may be slow to start but there is a lot of potential there to do something a bit different," he said. ($1 = 1.1071 Australian dollars) (Reporting by Maggie Lu Yueyang; Additional reporting by Elzio Barreto in Hong Kong; Editing by Stephen Coates)