PETALING JAYA: While Malaysia’s upcoming dual-listing framework with Hong Kong could give domestic companies access to a deeper pool of international capital, it may not automatically translate into higher valuations, with other concerns including trading fragmentation and the potential shift of price discovery offshore.
The simplified framework, which is set to take effect next month, will allow an initial public offering (IPO) prospectus issued and reviewed in Malaysia to be recognised in Hong Kong, eliminating the need for companies to prepare a separate prospectus for a simultaneous listing in the two markets.
BIMB Securities director of research Mohd Redza Abdul Rahman said while dual listings can enhance price discovery, their impact on valuation and liquidity remains highly stock and sector-specific.
“A valid market concern is trading fragmentation, where liquidity shifts toward the deeper market,” he told StarBiz.
Redza said valuation expansion depends on whether issuers can leverage Hong Kong’s deeper research coverage and institutional scale to achieve optimal price discovery for business models that may trade at different valuation benchmarks locally.
To mitigate liquidity diversion from Bursa Malaysia, he said the key catalysts include strong market-making mechanisms, cross-border arbitrage efficiency, and active participation by domestic institutions.
“Managed well, a dual listing can draw fresh foreign institutional flows into the broader Malaysian capital market via cross-border benchmark inclusion and co-branded index products,” he said.
This concern was also highlighted by Berjaya Research head of research Kenneth Leong who said the initiative will not “automatically improve IPO valuations as there are various factors that remain in consideration”, such as historical track record and prospects of earnings growth potential, sector exposure, IPO size etc.
“The dual listing framework could potentially deepen the pool of international institutional investors, but may not necessarily improve Malaysia’s IPO competitiveness and valuations,” he said.
Leong said companies with business exposure or operations in China could find the dual listing initiative particularly attractive, given Hong Kong’s proximity to the Chinese market as well as established access to investors in China.
The Securities Commission (SC) said that it is already identifying large unlisted Malaysian firms and encouraging them to consider pursuing IPOs in both markets.
Redza said the sectors that stand to benefit the most from this are semiconductor and technology, renewable energy and infrastructure as well as consumer and retail giants.
“From a capital retention perspective, particularly in high-growth technology and semiconductor spaces, this framework provides a vital strategic pathway.
“For the semiconductor and technology sector, fast-growing outsourced semiconductor assembly and test, automated test equipment and software firms scaling across Greater China and global technology supply chains could benefit.
“Meanwhile, capital-intensive renewable energy and infrastructure players, such as energy-transition asset developers and data centre operators seeking long-term international funding, could also be a beneficiary.
“Further, regional consumer brands looking to increase their exposure to East Asian institutional investors and broaden their brand equity could stand to gain as well,” he said.
Malaysia has established precedents for cross-border listings. For instance, IHH Healthcare Bhd
is known as one of the region’s most prominent dual primary listings, maintaining active trading on both the Main Market of Bursa Malaysia and the Mainboard of the Singapore Exchange.
Another company is Singapore-listed semiconductor equipment supplier UMS Integration Ltd, which had completed a secondary listing on the Main Market of the local bourse last August.
Domestic glove maker Top Glove Corp Bhd was also listed on the Mainboard of the Singapore Exchange in 2016. Top Glove had previously explored a dual primary listing on the Hong Kong exchange (HKEX) back in 2020 but the plan was subsequently shelved.
Meanwhile, Tradeview Capital chief executive officer Ng Zhu Hann said the success of the initiative would hinge on whether the adoption rate will be “sufficiently meaningful” which in turn would require “a lot of awareness and engagement with fund managers and analysts in both markets”.
“If we have companies that want to list in Hong Kong, our regulators need to make greater efforts to bring these companies to do roadshows and engage Hong Kong fund managers and investors. Likewise, Hong Kong regulators should do the same for Hong Kong companies seeking a dual listing in Malaysia,” he said.
Ng said while cross-border trading has become quite easy and seamless through digital brokers and international brokerage platforms, retail investors in Hong Kong, for instance, may still be more familiar investing in foreign companies if such firms are also listed on the HKEX. The same goes for Malaysian retail investors.
“As such, this dual listing initiative is a good move. There is no downside to it. While it may not lead to a significant uptick or materially change our stock market landscape, it provides companies with an additional avenue to raise funds,” he said.
On the choice of Hong Kong as the partner market, Ng noted that Hong Kong offers investors access to a distinct and deeper pool of capital as it is a very big financial market.
“Given that the initiative is aimed at attracting different fund flows, there is no point limiting it to just the local market or South-East Asia. The Hong Kong market provides an avenue for fundraising and fund flows that is distinct from South-East Asia.
“For investors who want exposure to Hong Kong and China, they can do so through Malaysian companies with a dual-listing in Hong Kong. It is a beneficial relationship for both sides,” he said.
While the size of the local market is dwarfed by Hong Kong’s, it has its own appeal. Ng pointed out that Malaysia provides an alternative for funds looking to park their money outside Hong Kong, Europe and the United States, underpinned by its position as one of the most well-regulated stock markets in South-East Asia.
“Malaysia’s stock market also has the support of local institutions, government-linked investment companies and the participation of retail investors. There is also a vibrant pipeline of IPOs coming through our market,” he said.
On the concern of trading fragmentation from the dual-listing initiative, Ng is of the view that the risk is unlikely to materialise as only a small portion of a company’s placement would be placed on the secondary exchange.
“This can be seen when UMS did a secondary listing in Malaysia. Only a small portion of its available float was allocated here,” he said.
According to Ng, Hong Kong companies looking to list in Malaysia through such an avenue would likely be firms in sectors that are not well represented in the local market, like robotics, EV manufacturers and advanced technology.
“Traditional, old-money sectors like plantation are not particularly sexy. Moreover, a dual listing in Hong Kong is unlikely to move the needle for them,” he said.
