“There is every reason why Australia should be a regional financial hub, continuing to engage with greater vigour in the global marketplace,” said Senator Nick Sherry, the Australian Minister for Superannuation and Corporate Law, last year. The Australian Securities Exchange hoped to become a financial hub in the Asia-Pacific; a dream which was quickly derailed by the deepening of the global economic downturn.
Yet the delay may have only been temporary, if the recent interest by Chinese companies in the ASX is an indicator. This year alone has seen three manufacturers from the mainland launch IPOs in Australia.
The ASX has been identified as an ideal listing environment for Chinese companies, in comparison to the options available in Hong Kong, Shanghai and New York. “The relatively straightforward ASX listing requirements makes it an attractive proposition for smaller Chinese companies, as in this aspect it represents a lower barrier of entry to listing,” said Pierre Lau, a senior associate at Chambers & Co.
In order to list on the ASX, the threshold for market capitalisation is a mere A$10m. In contrast, the HKSE requires approximately three times that amount (HK$200m). Similarly, the HKSE requires aggregated profits of HK$50m in the three financial years before listing, whereas the ASX only requires A$1m.
The listing rules of the Nasdaq are even more onerous, requiring up to US$11m in aggregated profits over three years.
Track record counts
The reputation of the Australian market is also appealing to Chinese companies, especially those that are not state-owned. “Australia presents a politically stable and relatively lowcost environment in which to base a corporate headquarter for Chinese companies wishing to operate internationally,” says Fai-Peng Chen, a partner at Minter Ellison’s Adelaide office. “Australia is also recognised for its strong corporate governance and has a transparent listing process.”
This compares to the SSE, where a listing halt was in place between September 2008 and July 2009. “Our sources tell us that there are currently more than 300 companies on the waiting list in China, which has created a backlog that could take up to two years or more to clear,” says Lau.
Similarly, the Chinese government has discretion as who is able to list on the SSE. “There is no level playing field since the government decides when you list, whether there has been enough companies from a certain province or a certain industry,” says Brendan Connell, a partner in South Australian firm Tindall Gask Bentley.
The reputation of the ASX market also precedes itself, and has excellent connotations in the Chinese economy. “The ASX has a reputation for honesty and reliability, and so there is significant kudos for a PRC company to say it is ASX listed – the inference is that it must be good,” Connell adds. However, although the opportunities may be ripe, there are still relatively few Chinese companies that have opted for an ASX listing.
“It is hard to say if there is a window of opportunity – everyone is probably waiting on more positive and consistent signals coming from the equities market in general,” says Jonathan Murray, a partner at Steinepreis Paganin.
Existing referral networks have played a role in Australian firms gaining Chinese work. Shenhua were referred to Chambers & Co for their IPO by AllBright Law Firm in Shanghai, as a result of the memorandum of understanding between the firms.
AllBright has also shortlisted another three Chinese enterprises interested in the ASX, which bodes well for the Exchange becoming a regional hub in Asia-Pacific.
“Australia represents a politically stable and relatively low-cost environment in which to base a corporate headquarters for Chinese companies wishing to operate internationally”Fai-Peng Chen, Minter Ellison (Adelaide)