Singapore's capital market has rebounded strongly since the SARS virus knocked the stuffing out of investment and consumer confidence in 2003. In that year, there were only 30 main board IPOs listed on the Singapore Stock Exchange (SGX), as compared to 51 in 2004. Up until June this year, there were 22 main board-listed IPOs.

"The SARS virus came on the back of other disasters and events in other parts of the world, and investor confidence and economic growth around the Asian region was affected," says Stamford Law partner Bernard Lui. "The Asian region is more economically and politically stable now and that is reflected in investor confidence, which is quite buoyant in Singapore now."

Kok Hoe Wong, the co-head of Rajah & Tann's corporate practice group, is equally ebullient in looking back over the last 12 months. "In 20042005 the market recovered," he says. Rajah & Tann advised five companies who listed on the SGX during this period, including the US$51m Pine Agritech IPO and US$46m Pearl Energy listing.

Get REIT on it

WongPartnership's equity and capital markets head Rachel Eng sees that particularly strong IPO growth has come from real estate investment trusts (REITs). There's been a lot of interest regarding REITs with the Suntec listing being covered and commented on throughout the region. The recent budget measures that exempt property transfers under REITs should mean that this sector continues to grow in the future," she says.

Michael Sturrock, a partner with Latham & Watkins' capital markets team, is of the same opinion. "The people I speak to in the business sector tell me this is a particularly attractive way of investing in Singapore, especially as a short-term investment option."

Allen & Gledhill advised the aforementioned Suntec on their listing, and partner Wico Yeo echoes Eng's views about REITs being particularly strong. "In terms of dollar value raised from IPOs, REITs and quality dividend yield stocks have generated strong, consistent interest from investors in Singapore."

This is certainly true for Allen & Gledhill, which has cashed in on the increasing level of capital market transactions. In 2004, they acted on the launch and listing of the aforementioned Suntec REIT which was the largest Singapore IPO in 2004, raising over US$421m. This year they acted on the Macquarie International Infrastructure Fund IPO, the largest IPO in Singapore this year that raised almost US$480m.

With deals like these, it is not too surprising to learn that Allen & Gledhill is easily the number-one ranked Singapore law firm when it comes to ranking local firms that have advised companies on IPOs in the past 12 months, acting on a combined value of over US$1bn-worth of IPO listings. "We focus on high-end and innovative IPOs and we continue to build on our signi.cant share of these IPOs," Yeo says.

Companies or underwriters?

The more established firms also seem to act more for the listed companies than for the underwriters. "The bigger and more prominent firms seem to advise the companies, while underwriters are often represented by more marginal firms," Wong says. "For us at Rajah & Tann, we mainly advise the companies." Bernard Lui says that at Stamford Law Corporation, which is second behind Allen & Gledhill in IPO ranking by value, the split between representing companies and underwriters is about 70:30.

The reputation of Allen & Gledhill's corporate and capital markets team means they represent clients on all sides of the transaction. "Allen & Gledhill seems to pick up a lot of clients on the underwriters side, particularly on the sophisticated financial IPO listings," Latham & Watkins' Sturrock observes. He adds that the "reputation and skill" of Lucien Wong, Allen & Gledhill's managing partner and a banking and finance specialist, has a lot to do with this.

As for Allen & Gledhill themselves, they are a lot more modest. "We continue to receive referrals from a wide range of sources, including issuers, underwriters and other advisers," Yeo says. With a number of law firms in Singapore (more so than Hong Kong) having the capability to act on IPOs, competition in the marketplace is fairly intense.

"The pool of firms that have the capability to act on IPOs is greater in Singapore than Hong Kong," says Lui. "If you have a look at the prospectus of listed firms in Singapore, you will see a lot of Singapore firms. This means that pricing can be a factor when clients choose who they want to act for them."

For Eng, the maturing Singapore market has diminished the role price plays in securing clients.

"Up until two years ago, price was the major factor for securing IPO deals and it was not uncommon for certain firms to undercut," she says. "Since then, clients now seem to more readily take into account other factors and will pay more for firms that are seen to have a lot of expertise and experience."

Wong of Rajah & Tann says that by undercutting rivals, it is unlikely you will pick up clients for the larger IPOs. "Experience and expertise are more important than price for the major listings. The general rule is that the bigger the client and size of the listing, the less important the fees. Smaller corporations are generally more price sensitive."

Wong goes on to add that most firms now have "a pretty established fee structure, which makes undercutting less likely".

The China question

In the wake of recent corporate scandals, the SGX has tightened the rules and regulations governing disclosure. Authorities in Beijing have also attempted to slow down the recent flood of domestic companies listing overseas.

These factors are cited by market watchers as likely to dampen the overall numbers of listings in the near future, but the stargazers remain cautiously optimistic on the whole.

"There are now more foreign listings on the SGX than local listings, and a lot of these are from companies in China," Wong says. "With the expected slow-down in the number of Chinese companies listing [due to PRC regulations], Singapore needs to look at diversifying its investment base to ensure it remains viable in the long term." One in 10 shares listed on the SGX are now from Chinese companies.

Eng is optimistic that the market will remain strong. "I think that 200506 will remain busy," she says. "The PRC regulations might slow down the number of Chinese companies listing in the short term, but overall the market is still strong and the increasing emphasis on corporate governance should ensure the long-term viability and suitability of Singapore as an attractive place to invest."

Latham & Watkins' Sturrock is more sanguine, and believes that international investors may look elsewhere in the near future. "I am not too optimistic about the long-term prospects for Singapore, but then I am not too optimistic about anything," he says.

"Right now, India is a big driver, Indonesia is becoming increasingly attractive and I think Singapore is viewed as being an okay place to invest generally." ALB

Who advised Singapore's Main Board IPO's by number
(June 2004 - June 2005)

* Figures refer only to firms acting for the listing company, not those acting for the underwriter

 source: Singapore Stock Exchange and law firms