Singapore Exchange Limited Has Just Lost Its Biggest IPO This Year In Manulife US REIT: What’s Next?

Back in May this year, there was news that an asset management arm of the Canadian insurer Manulife Financial Corp had plans to list its U.S. commercial properties here in Singapore in the form of a real estate investment trust (REIT).

Unfortunately, Manulife recently revealed that it will be delaying the US$465 million initial public offering (IPO) due to weak market conditions. According to a preliminary prospectus, Manulife US REIT had planned to raise about S$629 million by offering to sell units of itself at S$0.82 each. That offering price represents a 6.3% yield for investors.

The postponement of the IPO is a disappointing update for local bourse operator Singapore Exchange Limited (SGX: S68). The IPO market has been very weak for the company in 2015, with only US$33 million being raised so far this year. With half the year already gone, there’s a lot of catching up to do if Singapore Exchange would like to see similar figures to the US$619 million that was raised in IPOs for the whole of 2014.

Singapore Exchange has been facing pressures in its business for a few years now. With a new chief executive coming soon on 14 July, it would be interesting to see how the bourse operator addresses each of its challenges, one of which is the slowing IPO market.

In January this year, the company reduced the minimum lot size for trading in Singapore’s stock market from 1,000 shares to 100 and helped make high-priced shares – Jardine Matheson Holdings Limited (SGX: J36) and DBS Group Holdings Limited (SGX: D050 are good examples as they have prices of around US$56 and US$21, respectively, at the moment – accessible to many other investors in the process.

But more importantly, the change seemed to have increased participation amongst retail investors, especially for the higher priced shares which are commonly found amongst the 30 constituents of the market benchmark, the Straits Times Index (SGX: ^STI).

Foolish Summary

A sluggish IPO market is just one of the many challenges that Singapore Exchange has to face. But given that the company has been able to improve the situation in relation to the minimum lot size, it might not be unreasonable to assume that the firm would also be able to successfully address the weak IPO market in Singapore eventually.

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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 writer Stanley Lim does not own any companies mentioned above.