SINGAPORE: The Singapore Exchange (SGX) on Friday (Dec 4) eased one of the requirements to its minimum trading price (MTP) rule, following market feedback and the challenging market conditions.
Mainboard-listed companies that consolidate their shares before Mar 1, 2016 will be given six more months to comply with the MTP requirement. This means they will have until Sep 1, 2016 to ensure that their six-month volume-weighted average share price is 20 cents or more.
They will be placed under the SGX watch list for three years if they do not meet this rule.
Initially, the SGX gave these firms a grace period of until Mar 1, 2016 to comply. SGX's Head of Listing Compliance June Sim said in a statement that the extension is “to address market feedback that share prices post-share consolidation could be affected by challenging market conditions”.
“Investors should continue to monitor their investee companies and prod them to take action to comply, and more importantly, improve the long-term business fundamentals,” she said. “Companies should likewise announce their plans to comply with MTP and actively engage their shareholders."
A consolidation involves a firm buying back stock on the open market. This reduces the number of shares and should lead to a rise in the stock price.
SGX introduced the MTP rule for shares of mainboard companies in March with the aim of improving market quality and to reduce the risk of excessive speculation from small-cap stocks. As at end of October 2015, 94 of the 167 companies likely to be affected by MTP have either acted or announced plans to comply.
Among the 94 companies, 86 have decided on a share consolidation of which 65 have completed this corporate action.