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What Investors Need To Know About SGX’s New Regulations

Last week, the Singapore Exchange (SGX) announced plans for setting a minimum trading price of 20 cents for mainboard-listed stocks given strong public support for the requirement, in a move aimed at curbing excessive speculation and potential manipulation.

Details of the proposal

The new rules are expected to be introduced by March 2015 and implemented one year later in March 2016. On top of the minimum share price scheme, SGX is also proposing adjustments to the existing watch-list framework.

Under the proposed changes, companies that:

  • Book pre-tax losses for three straight financial years based on full-year audited financial statements and have an average market cap less than S$40 million over the last six months OR
  • Those that do not meet the minimum price threshold of S$0.20 will be put on the watch-list.

According to the proposals, the minimum trading price will be calculated using the company’s volume-weighted average price over six months. The review period for compliance with the requirement will be carried out on the first market day of March, June, September and December.

Companies falling into the watch-list will have up to three years to resolve the issue or face delisting. In conjunction with MAS to improve on the quality of issuers listed on SGX main board, SGX is helping out with the transition by waiving its share-consolidation fees until 2017 for companies to meet the new requirements.

There are also some exceptions for the above regulations. The financial criteria do not apply to secondary listings, companies which undergone an IPO for less than 6 months and REITs. That said, REITs are still obliged to be trading more than the minimum price in order to prevent de-listing.

Beware of impending changes ahead

As at June 30 2014, the requirement will affect about 222 companies out of over 600 companies on SGX’s main board. With the waiver of share-consolidation fees until year 2017, investors vested in these companies should be prepared for the sweeping changes that are about to come during these few years. Some examples include companies like Qingmei (SGX: KT9), Qian Hu (SGX: 552), and MDR Limited (SGX: A27).

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.