Chinese enterprises warm up to Australia’s ASX

The entrance to the Australian Securities Exchange (ASX).

Chinese enterprises are looking favourably at the Australian Securities Exchange (ASX) which has seen businesses such as the China Dairy Corporation, Traditional Therapy Clinics and Dongfang Modern Agriculture conduct their initial public offerings (IPOs) on the Sydney-based bourse in recent times.

As at July 2017, ASX has reported  total market capitalisation of $7.27 trillion, making it the ninth largest exchange in the world. By free float market cap, the exchange is ranked third in Asia.

From 2014 to 2016, IPO capital raised on the ASX amounted to $28.7 billion, with 104 listings in 2014, 126 in 2015 and 129 last year.

The appeal of Australia’s capital markets can be largely attributed to the country’s robust regulatory environment, which has recorded more than 25 years of uninterrupted growth, although not without some problems of its own

In comparison, the Chinese market suffers from high price fluctuations and market volatility, which came to the fore during the stock market turbulence of 2015and more bubbles are predicted in 2017.

Chinese consumer goods & the ASX opportunity

Tianmei Beverage Group, a Chinese consumer water products firm, pursued an IPO on the ASX earlier this year. This has seen the company continue to “trade profitably and in line with expectations,” according to its chairman Tony Sherlock.

While recent years have seen Chinese enterprises seek to list on the Nasdaq and NYSE, a study by the Macquarie Graduate School of Management (MGSM) analysed IPOs of companies large enough for the S&P/ASX 200 but too small for S&P 500. It found significant underpricing in NYSE and Nasdaq markets compared to the ASX.

Credit: ASX

Sherlock of Tianmei Beverage Group told DEALSTREETASIA what makes the Australian securities market attractive to firms such as his is a “well-regulated market, with good transparency and participation of both large and small investors.”

“As Tianmei trades in Australia-sourced fast moving consumer goods, it was natural to seek capital in the country and to engage with Australian investors who would recognise the opportunity for local goods to be sold in the Chinese market,” he added.

The tech perspective

The ASX has a growing technology sector, with the average market capitalisation of technology stocks coming in at $207 million and a median market cap of $40 million. Over the last three years, the exchange has seen more than 60 technology IPOs.

Technology, media & telecommunications (TMT) listings dominated 2016 in terms of volume; the vertical saw 26 listings, which raised $778 million in capital, representing 10 per cent of total market issuance. The sector provided attractive returns to investors, with a weighted average performance since listing of 34.9 per cent.

Credit: ASX

Calvin Cheng, the chairman of ASX-listed educational technology firm ReTech, which recently completed its IPO on the ASX, told DEALSTREETASIA: “We are a Singapore/Hong Kong company with our senior management in Singapore and headquarters in Hong Kong. We are a Sino-Foreign JV with 30 per cent non-PRC shareholding (prior to IPO). This means we are not even allowed to list in China even if we wanted to.”

“There are, of course, ways around this – for example, putting some shares in trust with PRCs – but then there is a two-year waiting list for IPOs in Shanghai and Shenzhen,” he added.

For Australian investors, having Chinese firms listed on the ASX opens up their access to the Chinese market, given that there was an A$1.2 trillion ($905.2 billion) trading turnover in 2015 on the ASX according to an Australian Financial Markets Association (AFMA) report. In Asia, funds are set to grow to $6 trillion by 2030 – indicating a huge potential for investors. 

Cheng of ReTech also noted that ASX possesses a good nucleus of technology corporations, something that he argues the Singapore Exchange (SGX) lacks. To Cheng, this translates to the benefit of having comparable firms to benchmark against and associated market liquidity for such enterprises.

“The ASX is seen as a mainboard listing, with the prestige that comes with it,” Cheng said, arguing that ReTech was too small for the HKSE main board, while the SGX suffered from poor valuations and low liquidity.

Credit: ASX

Singapore-based Dropsuite, led by chief executive Charif El-Ansari, which listed on the ASX via the reverse takeover (RTO) of Excalibur Mining last year, concurs.

“Liquidity is very good. With the growth in housing prices in Australia and likewise the capital markets, more people are investing in securities because housing is becoming unaffordable. This has resulted in a greater number of investors (some sophisticated, some not) in the Australian market which then stimulates the securities market.”

Also Read:

SGX is for companies with strong fundamentals, not risk: Dinesh Bhatia, SportsHero

Australia: Ex-CEOs of ASX-listed firms back Evans & Partners Global Disruption Fund

ReTech raises $13.5m via ASX listing, proceeds to fund tech acquisitions

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.