Yahoo Finance What Small Cap Stock Investors Need To Know About The SGX Watch-List
On 3 March, 41 listed companies were included in the SGX watch-list due to the new implementation of the 20-cent minimum trading price (MTP) rule. This brings it to a total of 76 companies to be in the SGX watch-list.
To put it simply, companies being in the watch-list are like students under the supervision of their discipline master.
What Is The SGX Watch-List?
The SGX watch-list was introduced in March 2008 by the Exchange to quarterly review listed companies on the Mainboard. The aim is improve the overall quality of listed companies in Singapore and to boost investors’ confidence in the market. With the watch-list, companies are required to provide continual compliance and investors are better informed about the risks of the companies being delisted.
However, the watch-list does not apply to listed issuers such as investment funds, global depository receipts, debt securities, exchange-traded funds, structured warrants, companies with secondary listings on the SGX, issuers listed for less than 6 months, issuers that have been suspended in accordance with Rule 1303(2) or 1303(3) or has been allowed to trade as they met the requirements of Rule 1018 (1). As such, real investment trusts (REITs) and business trusts are only subjected to MTP criterion but not the Financial Entry criteria.
Rule 1303(2) states that listed issuers will normally be suspended if they are cash companies, where the assets consist entirely or substantially of cash and short-dated securities. The suspension will remain in force unless the companies can adhere to the requirements of Rule 1018(1). As for Rule 1303(3), it states that listed issuers will be suspended if they fail or are unable to demonstrate to its shareholders or the Exchange to carry on as a going concern, including 3 stated circumstances.
Criteria To Be In The Watch-List
Listed companies will be placed in the watch-list if they failed to meet the MTP criterion or/and the Financial Entry criteria. The detailed criteria are as followed:
Minimum Trading Price Entry Criterion:
Records a volume-weighted average price (“VWAP”) of less than S$0.20 over the last 6 months.
Financial Entry Criteria:
Records pre-tax losses for the latest 3 consecutive financial years (based on audited full year consolidated accounts, excluding exceptional or non-recurring income and extraordinary items).
An average daily market capitalisation of less than S$40 million over the last 6 months.
In short, SGX will place listed companies in the watch-list if they are stocks that are consistently trading below 20 cents or if they are small market capitalisation stocks that are consistently making losses.
So What If They Are In The Watch-list?
Companies under the watch-list will face the risk of being delisted from the stock exchange by SGX if they fail to rectify their share price or their financial performance within the given cure period.
For companies that were placed under the watch-list before 1 March 2016, they will have a 24-month cure period. On the other hand, those that were placed under the watch-list after 1 March 2016, they will have a 36-month cure period.
The watch-list serves as a red flag for the investors to monitor more closely on the companies they invested in. On the other hand, it also helps companies and its management team to keep track on their performance and their future direction.
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