SINGAPORE - Twenty-seven companies were added to the Singapore Exchange's (SGX) watch-list on Monday (June 5) for failing to meet the revised minimum trading price (MTP) rule - making it 78 mainboard-listed firms in all on that list.
Altogether, 29 companies entered the watch-list on Monday, including two firms that failed to meet financial entry criteria based on profitability requirements.
But the revised MTP criteria was also a boon for two companies, which exited the watch-list under the latest assessment.
Drilling rig owner Jasper Investments and petroleum exploration and production firm Interra Resources said they had been removed from the watch-list, as each of them had achieved an average daily market cap of more than S$40 million over the last six months.
Companies on the watch-list must provide quarterly updates on their financial situation, and have 36 months to meet the MTP or financial criteria. Otherwise, they will face a delisting.
The MTP framework, which took effect on March 1 last year, is intended to highlight to investors the issuers that may be more susceptible to excessive speculation and potential manipulation. But it drew fierce criticism from investors and traders, who saw the rules as damaging to stock values because many companies had been forced to conduct share consolidations only to see prices plunge again.
In response to feedback last year, the SGX relaxed the entry criteria in December so that a mainboard-listed firm that maintains a six-month average daily market capitalisation of over S$40 million will not be watch-listed even if it misses the 20-cent minimum trading price requirement.
But the number of firms on the watch list has not fallen.
When the MTP was introduced last March, 57 companies failed to meet the rule. Now, it is 66. (The other 12 making up the total 78 on the watchlist are there for failing to meet the financial criteria.)
Mr Leon Yee, a lawyer and independent director of Federal International, which was one of over 100 issuers that previously resorted to share consolidations to meet the MTP, said: "There is a mismatch between financial performance and share price performance in Singapore, because of the low liquidity of our markets.
"As the years go buy, more companies will go on the watchlist, because there is only so much liquidity to go around. Until now, the regulator is still stuck on this. The fact of the matter is it is not working out for issuers."
Ms Ch'ng Li-Ling, head of the capital markets practice at RHTLaw Taylor Wessing, observed that "the rules are there for a reason."
But she noted that the SGX had exercised discretion once, last June, when it gave 13 companies affected by "recent market volatility" more time to meet the MTP so none were added to the Watchlist then.
Firms on the watch list have three years to meet the MTP or financial criteria. Otherwise, they face a delisting.
Perhaps, more tweaks to the MTP rule are not out of the question. In April, Professor Tan Cheng Han, the new chairman of RegCo, which is taking over all of SGX's regulatory functions, declared that he would not be afraid to reassess sacred cows in the rules framework.