In today’s tech-driven era, investors are becoming more sophisticated, leveraging advanced technology and data analytics to make informed decisions amidst the rise of green finance and virtual assets. Consequently, stock exchanges worldwide are evolving to meet these higher expectations.
At Moofest 2024’s special panel on “How global stock exchanges are fostering growth in domestic markets”, representatives from four stock exchanges — Singapore Exchange S68 (SGX), Japan Exchange (JPX), Hong Kong Stock Exchange (HKEX) and Nasdaq — shared various strategies and initiatives implemented to maintain investor loyalty and foster growth domestically.
Lily Chia, SGX head of regional equities and FICC sales, identifies two key trends among local retail investors. Firstly, there’s a significant shift towards passive investing amidst global economic shifts, with a rising preference for exchange-traded funds to manage uncertainty. SGX addresses this demand with the largest Asean ETF market, featuring various products across asset classes.
With interest rates peaking, there is also renewed interest in REITs. Citing Frasers Centrepoint Trust J69U ’s recent private placement which was 2.5 times subscribed, Chia says SGX is poised to capture a resurgence in investor interest as it hosts one of the largest REIT markets in the region.
On the other hand, Adeline Ee, HKEX managing director and head of sales and marketing in Asean, emphasises the exchange’s listing reforms that have attracted numerous new economy companies.
In 2018, HKEX launched three new chapters in Hong Kong’s listing rules to allow pre-revenue biotech companies, New Economy companies with weighted voting rights (WVR) structures, and qualified overseas listed companies to raise capital in Hong Kong,
Today, the HKEX has about 313 new economy companies, which have raised HK$953 billion ($164.7 billion) in funds and accounting for about 65% of all IPO proceeds since the reforms.
Another successful initiative by HKEX is the Connect programme, launched some 10 years ago. Connect started with Stock Connect, where Chinese investors can buy Hong Kong-listed stocks, known as Southbound trading, and Hong Kong and international investors can access Chinese A-shares or Northbound trading.
“In May this year, we hit a high for the year of HK$56 billion [for Southbound]. Total net buy for Northbound hit RMB83 billion [$15.41 billion], which is way more than the net buy for all of 2023 of RMB43 billion,” Ee says.
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The Connect programme continues to expand. HKEX has Bond Connect, ETF Connect, and Swap Connect. “We’ve announced that we will include REITs into the Stock Connect, as well as the RMB counters [on HKEX], which we listed last year,” Ee adds.
The HKEX is also continuing to diversify its product offerings, being the first in Asia to introduce virtual asset ETFs. Thus far, the bourse has seen a daily turnover of about HK$40 million and total assets under management of HK$2 billion. “We are also continuously growing our tech and product offerings to try to advance our markets in response to the evolving demand,” says Ee.
Japan is important because Japanese equities account for the second-largest country exposure in the global equity stock market, as represented by the MSCI All Country World Index.
Since the start of 2024, Japanese stocks have performed well in local currency terms and even in US dollar terms despite the depreciation of the yen. JPX senior executive officer Kawai Hiroki attributes the strong performance to two major changes in the Japanese market, namely corporate and investor transformation.
Over the last few years, Japanese companies have undergone major business restructuring, with listed companies being urged to focus on capital efficiency and stock prices. This led companies to disclose and implement plans for future growth investments, increased shareholder returns and portfolio realignment. Last year, a total of US$119 billion was distributed as dividends, more than double the amount from 10 years ago, Kawai says. He adds that around 900 real estate companies plan to increase their dividends, reaching new highs.
The corporate transformation has also driven investor transformation, with foreign investment in Japanese stocks exceeding US$19 billion in 1Q2024, surpassing last year’s levels. Kawai also highlights the importance of continuing to promote and strengthen its efforts to attract more foreign investors to Japanese stocks.
While local stock markets provide investors with a home-ground advantage, they are also cognisant of the need to diversify, especially considering the outperformance of US stocks over the past 12 months. The Nasdaq Composite Index, for example, is up over 20% year-to-date, with 66 IPOs in the first half of the year, including Super Hi International, the operator of hotpot chain Haidilao.
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James McKeone, Nasdaq vice-president and head of investment intelligence, Asia Pacific, points out the importance of investor education, especially considering the risk of investing in unfamiliar markets.
To address the uncertain environment amid upcoming elections and interest rate fluctuations, Nasdaq has partnered with platforms like Moomoo to provide essential US market data. Additionally, the stock exchange has created educational videos and content available in multiple languages, including Mandarin, Cantonese, and soon, Japanese.
In her closing remarks, Chia noted that numerous articles and news stories have discussed ways to make the Singapore stock market more vibrant. With 20 years of experience at the exchange, Chia believes that improving the market as a fundraising and trading platform requires the effort of the entire ecosystem.
“I am extremely hopeful about the things that we can do together, both from the private as well as the public sector. We are looking forward to working very closely with institutions, regulators and retail investors to make the market a lot more vibrant than it is. There is so much more that can be done, so it is indeed a collective effort. I look forward to all your support,” Chia adds.
