SAFE moots norms for member countries on secondary listings

The South Asian Federation of Exchanges (SAFE) has recommended model regulations for secondary listings of companies in member countries.

To facilitate this process, a preliminary report has also recommended mutual recognition of the listing regimes among SAFE members, supported by harmonisation of listing regulations.

Bangladesh, Bhutan, India, Mauritius, Nepal, Pakistan and Sri Lanka are member countries of SAFE.

The SAFE report on Strengthening Stock Exchange Listing Regimes and Regional Harmonisation will be considered at the ongoing three-day fourth annual general meeting of the organisation, being held in Mumbai from Tuesday.

The report has suggested that secondary or cross-listing for a company on the exchanges outside its home jurisdiction, i.e. on the exchanges in member countries, should be based on recognition of the listing regime of the country where that company is based.

"As a first step in encouraging cross-border investment in the region, SAFE member exchanges apply the "recognition" principle by making a provision in their listing agreements", the report said.

"The privatisation of Pakistan Petroleum Ltd. had targeted 5 billion Pakistani rupees, but ended up raising 21 billion rupees," said Syed Asim Jaffar, chairman of SAFE and Lahore Stock Exchange, Pakistan.

Similarly, in Bangladesh, the recent public issue of Bank Asia was over-subscribed almost 55 times.

Citing these examples, and that of Tata Consultancy Services in India, Zafar said there was a dearth of good quality equity issues, while there was surplus capital in the SAFE member countries in the prevailing low interest rates regime.

"Stocks of most companies in Pakistan are available at 9-10 price to earnings ratios. Hence, there is a lot of potential for Indian mutual funds to invest in Pakistan," Zafar said.

"Listing in the developed markets such as London, New York or Singapore are costly affairs," Manoj Vaish, vice-chairman, SAFE, and executive director and CEO of Bombay Stock Exchange, said.

"For a company at an intermediate level, regional listing could be an option. This would benefit the investors as well, since there would be reasonably sized, good quality listings," Vaish said.

Currently, the Indian stock market is the largest in this region, with the second being Pakistan, at roughly a 10th of the size of the former.

To ensure implementation of its model norms, the SAFE report has also suggested the establishment of a regional markets' committee and market development forums.

There are examples of companies from SAFE member countries wanting to get listed in the stock exchanges of other member countries, said Wali-ul-Maroof Matin, secretary general, SAFE, and chief operating office of Chittagong Stock Exchange, Bangladesh.

"There is a Sri Lankan telecom company wanting to list in Bangladesh," he said.