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ASIC Pushing Chinese IPO Hopefuls to Offer More Liquidity
The local exchange operator and corporate watchdog are maintaining a softly-softly approach in their longrunning， behind-the-scenes push to encourage better liquidity from foreign businesses， particularly state-controlled Chinese enterprises that list in Australia.
Unlike other major regional stock exchange operators， such as in Singapore and Hong Kong， the Australian Securities Exchange does not require a company to float any minimum percentage of its stock in order to be allowed to list. When a company lists with only a very small minority stake floated， it means new investors are likely to find their holding is highly illiquid thereby increasing their risk.
Mobile commerce business 99 Wuxian became the first Chinese company to list on the ASX in October 2013， floating a minority stake of just 5%.
The wave of Chinese companies listing on the ASX in the past three years， many with less than 2% free float， has led many to question whether the current rules need updating. In August 2013， the ASX and Australian Securities and Investments Commission launched a joint review into emerging market issuers that pledged as part of its remit to consider this issue.
No hard findings have been released and it now seems unlikely that rules will be changed anytime soon. Instead the ASX and ASIC have been working behind-the-scenes with share market listing hopefuls that are only proposing to float a minority stake to encourage them to improve the quality of their offering.
The regulator does have the power to refuse entry to a new market entrant that is offering less than 10 per cent free float if the company has not demonstrat- ed a pathway to achieve this post-listing， and it is increasingly using these powers.
ASIC Commissioner John Price told Fairfax Media that there have been “at least half a dozen” instances the past year when the regulator has placed a stop oder on an IPO prospectus because of concerns about capital structure. In a number of cases those concerns were over free float size.
Institutional investors and their brokers are wary of IPOs that offer little liquidity， meaning it is less experienced self-managed super funds that are most likely to get trapped in them.
“Liquidity is a major consideration for institutional investors that often slips of the radar of ‘mum and dad’ retail investors，” Ord Minnett senior investment adviser Tony Paterno said. Trade Minister says MFN Will Bring in More Chinese Investment
The Most Favored Nation （MFN） clause in the historic free trade agreement between Australia and China will see future Chinese investment gains flow into the Australian economy， Trade Minister Andrew Robb said on March 13.
The minister said in an interview with Fairfax Media that the MFN clause“means that we will automatically receive the same treatment provided by China to any other country in the future， including the European Union （EU） and the United States.”
The minister also revealed that a review of all provisions within the MFN deal would take place after three years and then again every five years after the initial evaluation.
“On most fronts， if not all， those will be protected， locked in， in the future when China make concessions with other countries，” he said， adding， “Overall， this means we have substantially （greater） preferential arrangements than any other trading partner. “
China and Australia signed a declaration of intent on practically concluding bilateral negotiations on a free trade agreement （FTA） on November 17， 2014.
According to the results of the nineyear-long talks， Australia will eventually remove tariffs on all goods imported from China， and a vast majority of Australian products will enter China tarifffree.
But the question of whether to ban such offers in the name of consumer protection is a vexed one.
Wilson Asset Management chairman Geoff Wilson said banning companies with a minimal free float from listing would likely do more harm than good.
“Retail investors need to remember the importance of a ‘buyer beware’ attitude when investing in stocks that don’t have much liquidity， but regulation that stopped companies from listing simply due to their free float size would be bad for the local market. The more new listings we attract the better，” Mr Wilson said.
The latest Chinese offering to hit the local IPO pipeline is football boots and jersey brand XPD Soccer Gear Group， which will launch its deal on Monday. XPD Group is targeting an equity raising of up to $15 million representing a free float of up to 17.6%， which would make it among the most liquid ASX-listed Chinese companies.
In February Premiere Eastern Energy， a family-owned petrol distribution company from Guangdong Province became the latest Chinese business to list a minority stake on the ASX， raising $3.5 million through the float of 1.9% of the company. Australia Orders China Group to Sell “Illegal”Sydney Mansion
Australia on March 3 ordered China’s Evergrande Real Estate Group to sell a Sydney mansion worth Aus$39 million （US$30 million）， saying it was bought illegally under foreign investment rules.
Cashed-up foreigners， many from China， have been blamed for driving up prices in Australian property markets， particularly Sydney and Melbourne， and placing home ownership out of reach of many locals.
Last week the government said it was cracking down to enforce rules under which foreigners are only allowed to buy new dwellings and are barred from purchasing existing residential property.
In the first major case since then， Treasurer Joe Hockey said he had made an order under the Foreign Acquisitions and Takeovers Act that “Villa del Mare”in Sydney’s exclusive Point Piper district be disposed of within 90 days.
“I made this order following advice from the Australian government solicitor that the purchase breached the act，” he said， adding that if it is not sold the matter may be referred for prosecution.
Hockey said the luxury home was bought in November last year for Aus$39 million by Golden Fast Foods. It is ultimately owned by Evergrande Real Estate Group， which is listed on the Hong Kong Stock Exchange.
He added that it was purchased via a string of shelf companies including in Australia， Hong Kong and the British Virgin Islands.
“Under the Foreign Acquisitions and Takeovers Act foreign investors must notify the Treasurer through the Foreign Investment Review Board before purchasing residential real estate，” Hockey said.
“Golden Fast Foods is a foreignowned company which failed to notify FIRB of its intended purchase.”
The property is on Wolseley Road， one of Australia’s most prestigious addresses with palatial homes boasting spectacular harbor views.
Earlier in March， the government said it would also tighten scrutiny of overseas investment in farmland， following concerns about valuable agricultural and mineral assets passing into foreign hands.
The local exchange operator and corporate watchdog are maintaining a softly-softly approach in their longrunning， behind-the-scenes push to encourage better liquidity from foreign businesses， particularly state-controlled Chinese enterprises that list in Australia.
Unlike other major regional stock exchange operators， such as in Singapore and Hong Kong， the Australian Securities Exchange does not require a company to float any minimum percentage of its stock in order to be allowed to list. When a company lists with only a very small minority stake floated， it means new investors are likely to find their holding is highly illiquid thereby increasing their risk.
Mobile commerce business 99 Wuxian became the first Chinese company to list on the ASX in October 2013， floating a minority stake of just 5%.
The wave of Chinese companies listing on the ASX in the past three years， many with less than 2% free float， has led many to question whether the current rules need updating. In August 2013， the ASX and Australian Securities and Investments Commission launched a joint review into emerging market issuers that pledged as part of its remit to consider this issue.
No hard findings have been released and it now seems unlikely that rules will be changed anytime soon. Instead the ASX and ASIC have been working behind-the-scenes with share market listing hopefuls that are only proposing to float a minority stake to encourage them to improve the quality of their offering.
The regulator does have the power to refuse entry to a new market entrant that is offering less than 10 per cent free float if the company has not demonstrat- ed a pathway to achieve this post-listing， and it is increasingly using these powers.
ASIC Commissioner John Price told Fairfax Media that there have been “at least half a dozen” instances the past year when the regulator has placed a stop oder on an IPO prospectus because of concerns about capital structure. In a number of cases those concerns were over free float size.
Institutional investors and their brokers are wary of IPOs that offer little liquidity， meaning it is less experienced self-managed super funds that are most likely to get trapped in them.
“Liquidity is a major consideration for institutional investors that often slips of the radar of ‘mum and dad’ retail investors，” Ord Minnett senior investment adviser Tony Paterno said. Trade Minister says MFN Will Bring in More Chinese Investment
The Most Favored Nation （MFN） clause in the historic free trade agreement between Australia and China will see future Chinese investment gains flow into the Australian economy， Trade Minister Andrew Robb said on March 13.
The minister said in an interview with Fairfax Media that the MFN clause“means that we will automatically receive the same treatment provided by China to any other country in the future， including the European Union （EU） and the United States.”
The minister also revealed that a review of all provisions within the MFN deal would take place after three years and then again every five years after the initial evaluation.
“On most fronts， if not all， those will be protected， locked in， in the future when China make concessions with other countries，” he said， adding， “Overall， this means we have substantially （greater） preferential arrangements than any other trading partner. “
China and Australia signed a declaration of intent on practically concluding bilateral negotiations on a free trade agreement （FTA） on November 17， 2014.
According to the results of the nineyear-long talks， Australia will eventually remove tariffs on all goods imported from China， and a vast majority of Australian products will enter China tarifffree.
But the question of whether to ban such offers in the name of consumer protection is a vexed one.
Wilson Asset Management chairman Geoff Wilson said banning companies with a minimal free float from listing would likely do more harm than good.
“Retail investors need to remember the importance of a ‘buyer beware’ attitude when investing in stocks that don’t have much liquidity， but regulation that stopped companies from listing simply due to their free float size would be bad for the local market. The more new listings we attract the better，” Mr Wilson said.
The latest Chinese offering to hit the local IPO pipeline is football boots and jersey brand XPD Soccer Gear Group， which will launch its deal on Monday. XPD Group is targeting an equity raising of up to $15 million representing a free float of up to 17.6%， which would make it among the most liquid ASX-listed Chinese companies.
In February Premiere Eastern Energy， a family-owned petrol distribution company from Guangdong Province became the latest Chinese business to list a minority stake on the ASX， raising $3.5 million through the float of 1.9% of the company. Australia Orders China Group to Sell “Illegal”Sydney Mansion
Australia on March 3 ordered China’s Evergrande Real Estate Group to sell a Sydney mansion worth Aus$39 million （US$30 million）， saying it was bought illegally under foreign investment rules.
Cashed-up foreigners， many from China， have been blamed for driving up prices in Australian property markets， particularly Sydney and Melbourne， and placing home ownership out of reach of many locals.
Last week the government said it was cracking down to enforce rules under which foreigners are only allowed to buy new dwellings and are barred from purchasing existing residential property.
In the first major case since then， Treasurer Joe Hockey said he had made an order under the Foreign Acquisitions and Takeovers Act that “Villa del Mare”in Sydney’s exclusive Point Piper district be disposed of within 90 days.
“I made this order following advice from the Australian government solicitor that the purchase breached the act，” he said， adding that if it is not sold the matter may be referred for prosecution.
Hockey said the luxury home was bought in November last year for Aus$39 million by Golden Fast Foods. It is ultimately owned by Evergrande Real Estate Group， which is listed on the Hong Kong Stock Exchange.
He added that it was purchased via a string of shelf companies including in Australia， Hong Kong and the British Virgin Islands.
“Under the Foreign Acquisitions and Takeovers Act foreign investors must notify the Treasurer through the Foreign Investment Review Board before purchasing residential real estate，” Hockey said.
“Golden Fast Foods is a foreignowned company which failed to notify FIRB of its intended purchase.”
The property is on Wolseley Road， one of Australia’s most prestigious addresses with palatial homes boasting spectacular harbor views.
Earlier in March， the government said it would also tighten scrutiny of overseas investment in farmland， following concerns about valuable agricultural and mineral assets passing into foreign hands.