Singapore studying proposals to revive its struggling stock market

SINGAPORE: Singapore is studying proposals to revive its struggling stock market amid concerns about its lagging performance compared to regional peers.

According to three people familiar with the matter, the Financial Times reported that the Singapore Exchange (SGX) is examining a document submitted by the Singapore Private Equity and Venture Capital Association (SVCA), which lists state funds GIC and Temasek among its members.

Key government agencies, including the Economic Development Board, the Ministry of Trade and Industry and the Monetary Authority of Singapore, are also considering the SVCA’s suggestions.

Talks have been ongoing since the beginning of the year, driven by a growing trend of Southeast Asian companies, such as Carro, opting to go public in the United States rather than Singapore.

Demand participation in the stock market

To close this gap, one proposal involves mandating stock market participation from the growing influx of private capital into Singapore, including family office funds and wealth management firms.

There are also more radical ideas on the table, such as emulating mechanisms seen in countries such as Australia and Thailand, allowing pension and sovereign funds to invest in shares.

This marks a shift away from GIC’s predominantly international investments as the Singapore government seeks to bolster its local market.

An industry expert involved in the discussions highlighted a shift in the government’s mindset towards considering the health of the stock market as an integral part of Singapore’s national agenda.

According to one industry expert, “Is it possible to be a comprehensive and relevant international financial center with an anemic stock market? Maybe not.”

An anonymous person involved in the creation of the document noted that they “have not seen a whole-of-government and industry-wide approach like this” since Singapore’s efforts to promote its technology and venture capital sector in the late 2000s.

SGX Chairman Koh Boon Hwee, a renowned business veteran, has played a key role in championing new perspectives, a departure from past practices.

However, official responses remain cautious. MAS claims it “has received the proposals and is reviewing them,” while SGX, EDB and MTI decline to comment.

SGX as “one of the quietest” globally last year

Singapore has become a financial center in recent years, partly due to Chinese President Xi Jinping’s crackdown on Hong Kong.

Additionally, the island state has seen significant inflows of private wealth and capital, attracted by its stability and low-tax, business-friendly environment.

However, this prosperity has not translated to the stock market, plagued by low volumes and concerns about corporate disclosure.

Delistings frequently outnumbered listings and despite attracting new economic and technology companies, SGX struggles to keep pace with its regional counterparts.

Last year, it recorded one of the lowest trading volumes globally and was cited as “one of the quietest exchanges,” a stark contrast to the IPO boom witnessed elsewhere in Asia.

Regional peers such as Indonesia and India have seen surges in IPOs, leading to “growing fears” that even Singaporean private equity could leave and gravitate towards these faster-growing markets.

The government has been closely watching policies in other countries, such as the UK’s push for pension schemes to support business growth.

Like GIC, Singapore’s Central Provident Fund has ample capital. Although retail investors can use their CPF funds to invest in specific stocks, this has not significantly affected trading volumes.

There is currently no government policy that encourages greater CPF investment in stocks.

Collaboration with Southeast Asian stock markets

Another proposal includes fostering closer ties with Southeast Asian stock markets, which could culminate in Singapore hosting a regional exchange. However, skepticism remains over whether these initiatives can reverse SGX’s trajectory.

A Singapore-based hedge fund executive noted that “creating supply and demand is difficult.” He also noted the need to “talk to market makers, such as local funds and asset managers.”

While Singapore touts itself as a hub of innovation, its risk-averse retirement system presents challenges. Efforts to attract secondary listings and introduce Spac regimes have failed in the past.

The Singapore-based hedge fund executive said: “It’s good to have ideas and make them part of Singapore’s national agenda.

But fixing poor disclosure practices or strengthening corporate governance to give investors more certainty remain broader issues for us.” /ITSG

Also Read: IPO Market 2024: SGX faces tough international competition as markets recover

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