International Listings on ASX Road to growth and opportunity
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About the Australian Equities Market Asia Pacific s second largest market With a market capitalisation of over A$1 trillion the Australian cash equities market has a strong global presence. It is consistently weighted in global indices (MSCI and S&P/Citigroup Global Equities Indices BMI) among the top eight equity markets in the world. In Asia-Pacific Stock markets it is second only to Japan in terms of free float market capitalisation. Growing investment funds Australia has the fourth largest investment fund assets pool in the world and the largest in Asia. Investment Fund Assets 1, US$, December Quarter 27 1 Source: Austrade, 28 Benchmark Report: Australia a Global Financial Services Centre Note: Circles are not to scale. Due to definition, the above figures are not strictly comparable. 1 Refers to home-domiciled funds, except Hong Kong, South Korea and New Zealand, which include home and foreign-domiciled funds. Fund of funds are not included. In this statistical release investment fund refers to a publicly offered, open-end fund investing in transferable securities and money market funds. It is equivalent to mutual fund in the USA and UCITS (Undertakings for the Collective Investment of Transferable Securities) in the European Fund and Asset Management Association s statistics on the European investment fund industry. 2 Standard & Poor s Investment Consulting have assumed: A$1= US$.8.
About the Australian Equities Market continued Australia s financial services companies have growing operations around the globe, including activities in North America, Europe and the Asia-Pacific region. Australia has a strong global presence in investment banking, funds management and property and infrastructure funds. Australia s Financial Services Industry: Global Footprint 28 2 Source: Austrade, 28 Benchmark Report: Australia a Global Financial Services Centre The ability of Australia to punch above its weight in terms of funds management has been underpinned by a compulsory superannuation (retirement) regime, which is projected to grow Australian Funds Under Management (FUM) to over A$3 trillion by 216. This growth is creating strong demand from domestic fund managers for exposure to international equities listed on ASX.
Growth in Superannuation underpins continued Market Strength Projected Growth in Total Superannuation Assets ($bn) 4, 3,5 3, 2,5 Forecast 1,5 1, 5 Jun 96 Jun 97 Jun 98 Jun 99 Jun Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 A $ B 2, Source: APRA Rainmaker 27 Australian government policy is directed at further developing the local funds management industry. A recent change to the Australian dividend withholding tax regime (leading to a rate which will be amongst the lowest in the world) is likely to further accelerate the growth in FUM and underpin Australia s development as a global funds management and capital market centre. 3 The resulting strong growth of funds is outstripping the growth in locally accessible listed assets and this demand/supply imbalance is continuing to widen. Domestic fund managers are urging ASX to facilitate major international listings on ASX to address this imbalance. The challenge for Australian fund managers is further exacerbated by the fact that most have mandates from their superannuation fund clients for investment in equities listed in Australia or specifically on ASX. A report recently commissioned by ASX from Orient Capital, a highly regarded Investor Relations services company in Australia, found that over A$21 billion of Australian FUM is currently not available for investment in overseas-based equities because of domestic focused mandates. These funds would become available if those companies were to be traded on ASX. Index Changes From 26 non-domestic listed companies were allowed to be included in local Australian benchmark indices. This allowed companies like News Corporation, which is listed on ASX and NYSE, to be in the key Australian index despite moving its country of incorporation from Australia to the US. In 28 Standard & Poor s and ASX announced a further key change to the ASX index methodology, allowing large international companies listed on ASX as Foreign Exempt listings (see page 8 for further details) to be eligible for inclusion in all key indices. A Foreign Exempt listing applies to those large companies already listed on another major exchange, as a result of which they are given an exemption from most ASX listing rules provided they are complying with the rules of their main exchange. The index methodology changes were effective for the 28 September-quarter index rebalance.
Market performance ASX: a global exchange Australian Securities Exchange is ranked in the top 1 listed global exchange groups by market capitalisation. Rank Exchange Market Capitalisation (USD billion) 1 Chicago Mercantile Exchange (CME) $24.4 2 Deutsche Börse $14.4 3 Hong Kong Exchanges and Clearing (HKEx) $11.6 4 Intercontinental Exchange (ICE) $7.1 5 NYSE Euronext $6.9 6 Nasdaq OMX Group $5.2 7 Singapore Stock Exchange (SGX) $4.9 8 Australian Securities Exchange (ASX) $3.4 9 London Stock Exchange (LSE) $2.7 1 Tokyo Stock Exchange (TSX) $1.8 Source: Bloomberg, as at Oct 28 4 The Australian equity market has experienced significant growth over the last 15 years, with annual turnover increasing fivefold and market capitalisation doubling in the last ten years. In the same period average market liquidity, at 17% in 28 Financial Year, has more than doubled. ASX Equity Market Turnover Average Total Market Capitalisation and Liquidity (1987 to 27/28 FY) 1,6 11 1,4 1 9 A $ B 1,2 1, 8 6 8 7 6 5 4 P e r c e n t a g e ( % ) 4 3 2 2 1 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 7/8 FY Turnover A$B Average Mkt cap A$B Liquidity %
Impressive returns Despite the turmoil of 28, ASX equity market returns in recent years have been impressive when compared with those of other markets, as the following graph demonstrates: Global Index Comparison 25 2 15 1 5 +28% -19% -37% -55% -58% 2 21 22 23 24 Percentage increase/decrease 25 26 27 28 S&P/ASX 2 Dow Jones FTSE NIKKEI Nasdaq 5 Initial Public Offering (IPO) activity Since 21, the number of new equity listings has grown consistently. In the 28 financial year, the official number of ASX new listings was 236* with total capital raised at IPO reaching A$11.2 billion. The average and median capital raisings were A$56 million and A$11 million respectively. * Includes debt listings and stapled securities Australian IPOs 1999 to 27/28 Financial Year 35 3 25 IPO Cap raised A$B 25 2 2 15 15 1 1 5 5 1999 2 21 22 23 24 25 26 27 New Equity Listings 7/8 FY A$B
Market performance continued ASX provides a solid platform for capital raisings ASX is consistently among leading markets for initial and follow-on capital raising. The World Federation of Exchanges (WFE) data shows that ASX was ranked sixth in the world for capital raised by listed issuers over 26 and 27, and that this ranking rose to fourth for the first 1 months of 28. Capital raised by share issue in 28 Calendar Year* 16 12 Subsequent capital raised, USD billion Capital raised at IPO, USD billion US$B 8 4 6 Euronext** NYSE Group** London Stock Exchange** ASX Sao Paulo Source: World Federation of Exchanges * 1 months to Oct 8 National Stock Exchange of India Shanghai Stock Exchange Hong Kong Exchanges and Clearing ** It has been estimated that between Euronext, NYSE Group and London Stock Exchange up to US$4 billion has been raised to recapitalise financial institutions. BME Spanish Exchanges World-class legal and regulatory environment Australia is one of the oldest and most stable democracies in the world. Its political and legal institutions are recognised globally for their transparency, impartiality and robustness. The Australian financial sector regulatory regime is world class and provides security and integrity, through a sound, flexible and strong system of financial regulation designed to prevent systemic failure, and avoid unnecessary burdens on business. ASX, Australia s leading licensed market operator, plays a key role as front-line regulator, maintaining high standards of market integrity. This role is supported by the Australian Securities and Investment Commission (ASIC), which has overall regulatory responsibility for capital markets.
Benefits of listing on ASX Benefits to companies ASX s unique position as a developed market in the Asia-Pacific region and time-zone offers international companies exposure to the growing pool of investment capital in the world s fastest growing region, as well as providing the opportunity for global trading and price discovery on a round-the-clock basis. Broker and Fund Manager Expertise Access to the breadth and depth of Australian broker and fund manager expertise. Many already follow and analyse large international companies as part of their broader analysis of domestic companies. You will be in good company ASX attracts many leading global companies who are primarily listed on other stock exchanges. Newmont Mining, Constellation Brands and AngloGold Ashanti are examples of foreign exempt listings on the ASX. News Corporation, Resmed and Telecom NZ are some examples of the numerous foreign-domiciled companies with a full ASX listing. Access to capital for growth An ASX listing provides the opportunity to raise capital at the time of listing and on an ongoing basis through a range of innovative and flexible capital raising mechanisms. M&A currency Under the Australian taxation system scrip-for-scrip offers can provide capital gains tax rollover relief for investors in the acquired company, increasing the likelihood of a successful transaction. Investors can also benefit through their continued participation in the acquiring entity. Higher public and investor profile in Australia An ASX listing enhances your company s profile in Australia, sustaining demand for your company s shares as well as increasing the standing and reputation of your business in Australia. 7 Institutional investment Listing provides access to professional and institutional investment from a funds management industry that is amongst the world s largest. This institutional shareholder base increases the certainty of capital supply should you need additional capital in the future. Alignment of employee/management interests and commitment Listing will give you more flexibility to incentivise your Australian-based workforce through share-based remuneration that aligns their interests with the goals of the organisation. Improved valuation Some major dual-listed companies command a significant valuation premium on the ASX compared to peer markets such as LSE. Reassurance of customers and suppliers An ASX listing will make it easier for your Australian based customers and suppliers to share in the growth of your company. Benefits to investors The challenge for Australian fund managers is that most have mandates from their superannuation fund clients for investment in equities listed in Australia or specifically on ASX. Whilst mandates can be changed there remains a strong preference for trading and, importantly, settlement (through ASX s settlement depository) in this time zone. An ASX listing will provide international diversification to domestic Australian investors with all the convenience of a local listing. Investors will also get unique exposure to economies, markets, industries and management teams not available through existing ASX-listed securities.
The ASX Listing Process Requirements for a foreign incorporated company to list on ASX There are two ways a foreign entity may list on ASX: either as an ASX Foreign Exempt listing or as an ASX listing. ASX Foreign Exempt Listing Entities already listed on another stock exchange with a significant profit history or significant net tangible assets may be eligible to apply in this category. Many of ASX s on-going listing rules do not usually apply to ASX Foreign Exempt Listings. To be a Foreign Exempt listing the company s overseas home exchange must be a member of the World Federation of Stock Exchanges (WFE). A listing on ASX attracts low initial and ongoing costs. The Foreign Exempt listing rules are tailored for large international companies and recognise the extent of regulation and supervision already applying in that company s home market, thereby largely eliminating any dual regulation and compliance burden that might otherwise arise. Foreign Exempt Listing requirements are as follows: Criteria general Requirements 1 Overseas exchange the entity s overseas home exchange must be a member of the WFE 2 Company size A$2 million profit before tax for each of the last 3 years OR A at least A$2, million net tangible assets (NTA) 8 3 Number of shareholders At least 1, holders each having a parcel of securities with a value of at least A$5 ASX Listing The entity may or may not be already listed on another stock exchange. Foreign entities listed as ASX listings are subject to ASX s usual on-going listing rules, irrespective of whether they are listed on another stock exchange. A foreign entity seeking ASX listing is subject to the same admission requirements that apply to an Australian entity, irrespective of whether it is listed on another stock exchange. The requirements are as follows: Criteria general Requirements 1 Company size A$1 million profit over the past 3 years + A a$4, over the last 12 months OR A a$2 million NTA OR A a$1 million market capitalisation 2 Number of shareholders 5 holders each having a parcel of securities with a value of at least A$2, OR 4 holders each having a parcel of securities with a value of at least A$2, and 25% held by unrelated parties
About ASX As one of the world s top-1 listed exchange groups, measured by its market capitalisation, the ASX Group was created through the merger of the Australian Stock Exchange and the Sydney Futures Exchange. The ASX Group operates under the brand Australian Securities Exchange. The Australian Securities Exchange spans the markets for corporate control, capital formation and price discovery and functions as an operator, supervisor, central counterparty clearer and payments system facilitator. The diverse domestic and international customer base of the Australian Securities Exchange includes issuers of a variety of listed securities, corporates, investment banks, trading banks, fund managers, hedge funds, commodity trading advisers and proprietary and retail traders. More information on ASX can be found on our website www.asx.com.au Further information Richard Murphy General Manager, Equity markets t +61 2 9227 72 e richard.murphy@asx.com.au Eddie Grieve Manager, Listings and Capital Access t +61 2 9227 519 e eddie.grieve@asx.com.au Asia Andrew Musgrave Regional Manager t +61 2 9227 211 e andrew.musgrave@asx.com.au North America David Mitchell Regional Manager t +1 312 788 3363 e david.mitchell@asx.com.au europe James Keeley Regional Manager t +44 2 796 2534 e james.keeley@asx.com.au
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