Technical Glitch Delays Labuan Financial Exchange's First Listing

by Mary Swire, Tax-news.com, Hong Kong

18 April 2001

According to a report in the Malaysian Business Times, the Labuan Financial Exchange (LFX), which was established as one of the principle vehicles to promote Labuan as an upcoming offshore financial centre, has had to postpone the listing of its first company - possibly until the end of April - as a result of technical difficulties.

The aim of the LFX is to facilitate the listing of a range of financial instruments, including equities, investment funds, debt instruments, and insurance-related instruments, based both on conventional and Islamic principles. The first company due to be listed on the LFX has not been named, but it is said to be a subsidiary of a company listed in the US.

Exchange officials say the delay is just a small hitch and the listing will go ahead, once techical issues are resolved. The listing is expected to raise up to US$5m through the issue of between 6.5 million and 8.5 million shares, with about two million to be made available to the public.

So far, the LFX has not had a tremendous response. The Business Times reported one offshore banker as saying that the first listing is unlikely to see much action: 'You can expect minimal or no trading as the secondary market is not liquid. Getting on to the exchange is more for the purpose of acquiring a listing or raising capital,' he said.

However, Malaysia's Bank Negara has said that the LFX should see several listings in the near future. Datuk Dr Zeti Akhtar Aziz, Chairman of the Labuan Offshore Financial Services Authority (LOFSA), said that these prospective companies are currently in the process of obtaining regulatory approval.

Officials at the LFX have largely put the disappointing level of interest in the LFX down to a lack of market awareness, but they have highlighted the strengths of the exchange, including the fact that it shares the same time zone with major Asian financial centres such as Hong Kong, Tokyo and Singapore, and has major tax incentives, such as not imposing capital gains taxes, contract note duties or exit levies, and charging a minimal corporate tax of RM20,000 or 3 per cent of taxable income, whichever is lower.

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