Henry Tan charts the success of Aim in attracting Chinese companies.
The rapid expansion of China’s economy, privatisation of state-owned enterprises, deregulation of previously restricted industries and increased M&A activity have led to a significant increase in the number of Chinese companies listing overseas. Aim, in particular, has become very popular in China. In 2004, four Chinese companies applied for an Aim listing. This increased to a total of 12 in 2005 and 31 in 2006. Up to September 2007, 61 Chinese companies had listed on Aim. They come from a range of sectors including agriculture, technology and energy.
The Aim Attraction
Most larger Chinese companies choose to list in China or Hong Kong. If they have international ambitions then Hong Kong might still be an option, but many choose to list in the US. In the case of smaller, high-tech companies however, Aim has been proving increasingly popular in China since 2005.
Chinese companies look to list on Aim for much the same reasons as any other company. They seek to achieve liquidity in a good investment environment and to achieve a high return. They might also list to gain publicity for their company. Aim offers smaller, growing Chinese companies all the benefits of being traded on a world-class public market within a regulatory environment that is designed to meet their needs.
A key facet of Aim’s attraction in China lies in its regulatory set up. There are no minimum criteria in relation to company size, or the number of shares held by the public and no need for a trading history. The initial public offering (IPO) process itself is essentially self-regulated through the Nomad.
Chinese companies are also attracted to Aim because they are able to take fundraising decisions or engage in corporate activity without recourse to shareholders.
The IPO process on Aim is considerably quicker than on local markets. Chinese companies have been able to complete IPOs on Aim within 12 to 16 weeks, as opposed to 12 to 24 months in Hong Kong and 8 to 12 months in Singapore. This also means it should cost significantly less.
Possible Slowdown?
Despite the benefits, the steady flow of Chinese companies looking to tap London’s Aim investors seems to be slowing. One possible cause of this slowdown is Singapore’s plans for a new stock market for smaller businesses.
The proposed Singapore junior market will be operated by the same body as the main market, with reduced listing requirements to allow more freedom for corporate activity. In other words, it may be just like Aim, only far closer to China.
Despite the fact that Chinese companies have done well on Aim, and the actual listing experience has been broadly positive, there are drawbacks. The long distances and conflicting time zone and language differences between China and the western-based investment and advisory community cannot be completely disregarded. It takes an experienced and flexible advisory team to list a Chinese company successfully. The possible introduction of a new market player in Singapore will provide much greater competition for Aim. We await the impact of this on the current east-to-west flow with great interest.
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