Recently, we gave our opinions to The Edge Singapore in the recent article titled SGX versus HKEX. You may read the original article in the following links below:
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In our opinion, we do feel that Hong Kong is a more attractive place for investors and companies applying for listing for usual reasons such as liquidity and valuations respectively. However, these are actually just symptoms of a more fundamental issue.
Ultimately, Hong Kong is seen as a proxy for China. While Singapore, despite a big number of foreign listings, still acts, to some extent, a proxy for the local economy. Hence, most of the capital flow would be to Hong Kong than to Singapore resulting in better liquidity and valuations.
Furthermore, there is the issue of the difference in demographic profiles of investors in Hong Kong versus Singapore. In Singapore, we feel that as the population ages, the average investor becomes more risk-averse and tends to trade less. Such investors tends to sway more towards investments – such as investment bonds – that offer them a steady stream of income as they squirrel away savings for their retirement and their children’s college education.
That said, we do have to offer caution that while Hong Kong may offer better liquidity and valuations, this is not guaranteed. Whether a company gets listed in Hong Kong or Singapore, it will have its fair shares of advantages and disadvantages.
The volatility of companies getting listed in Hong Kong is far greater – look at that of LHN Holdings or Xinghua Port Holdings share price below.
Furthermore, not all companies that left SGX have achieved a much better valuation in Hong Kong post-IPO. Some examples would be Time Watch that was delisted from SGX in 2011 at 5x PE and is currently trading at around 8x PE or Want Want that was delisted from SGX in 2007 and is currently trading at around 17x PE.