Delistings outnumber new listings on the Singapore Exchange S68 so far this year. What can be done to arrest this worrying trend?
The Singapore Exchange (SGX) is set to see more delistings than listings this year. While the exchange has seen more listing interest in 2H2024 compared to the first half of the year — when it saw only one initial public offering (IPO) — SGX is still the bourse with the least amount of company issuances in Asean.
So far this year, the companies that have delisted or are delisting from SGX include Silverlake Axis 5CP , Second Chance Properties 528 , Isetan Singapore , Ossia International O08 , RHT Health Trust , RE&S Holdings 1G1 , Best World International , AGV Group , Halcyon Agri, SMI Vantage and Dragon Group International . Trading of Great Eastern Holdings G07 ’ shares has been suspended since July 15, but it is not delisted. In comparison, the Singapore Institute of Advanced Medicine Holdings was the only one that completed its IPO on SGX in the first three quarters of the year — and on the Catalist board.
The tepid environment is a reflection of the overall global IPO market. According to a recent report by EY, 870 IPOs were recorded globally in 9M2024, down 11% y-o-y. The world’s IPOs raised a total of US$77.6 billion ($101.58 billion), down 23% y-o-y from US$100.8 billion in the same period last year. In the Asia Pacific (Apac) region, IPOs almost halved to 330 from 575 in 9M2023, with proceeds raised at US$20 billion, down 67% y-o-y from US$60 billion.
EY notes that Apac saw an uptick in its IPO market. In 3Q2024, the region saw 109 IPOs raising US$9.6 billion. This represented a 6% improvement in volume and a 106% improvement in proceeds q-o-q.
Looking closer, Asean launched 28 IPOs in 3Q2024, with proceeds totalling US$1.1 billion, more than double the previous quarter. This was primarily driven by Malaysia’s 99 Speed Mart Retail Holdings, which was the second-largest IPO in the region year-to-date.
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On SGX, restaurant operator Food Innovator Holdings launched its Catalist IPO on Oct 9, while karaoke chain operator Goodwill Entertainment is looking to register its prospectus on Oct 25. Two firms — LYC Medicare Singapore and A Wellness Holdings — withdrew their applications after lodging their prospectuses this year.
However, the number of securities listed on SGX has been on a steady decline. In January 2023, the bourse had a total of 647 securities listed. By the end of the year, this number had dropped to 632. As of September, SGX had a total of 620 securities listed.
Many of these companies were forced to delist from SGX due to financial challenges, liquidation or strategic restructuring. However, other companies, like Silverlake Axis, made a conscious decision to privatise, citing greater control and flexibility to use and deploy its available resources. The company also believes it will be able to save on compliance and staff costs associated with maintaining its listed status.
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Similarly, RE&S shares traded for the last time on Aug 30 following a buyout offer from private equity firm Southern Capital, which took the company private to provide greater flexibility for long-term business growth and reduce the costs associated with maintaining a public listing.
To stem a pattern of delistings here and revive the listing venue, the Monetary Authority of Singapore (MAS) set up an equities market review group in August.
The review group consists of 10 leaders from both the public and private sectors, including Lee Chuan Teck, chairman of Enterprise Singapore; Chia Der Jiun, managing director of MAS; Dilhan Pillay, CEO of Temasek Holdings; and Png Cheong Boon, chairman of the Singapore Economic Development Board (EDB). While the review will take up to 12 months, MAS says the review group will announce their recommendations in phases so proposed measures can be implemented as soon as possible.
Stringent rules, high cost
In June, The Edge Singapore discussed low liquidity and poor valuations on SGX with issue 1142’s cover story, titled “How to jump-start the stock market”.
Could high costs also be a problem? Mainboard-listed equity securities, for example, are subject to a listing fee of between $100,000 and $200,000, calculated from a $100 charge for every million dollars of the market value at admission. For each application, there is also a fixed, non-refundable processing fee of $20,000 for an application.
Mainboard-listed equity securities are also subject to a minimum fee of $35,000 and a maximum fee of $150,000, based on $30 for every million dollars of market value, billed twice a year.
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For Catalist listings, a minimum fee of $30,000 and a maximum fee of $100,000 will be imposed, calculated from a $100 charge per million dollars of the market value at admission. An application will also have a fixed, non-refundable processing fee of $2,000. An annual minimum fee of $15,000 and a maximum fee of $50,000 based on $25 per million dollars of market value are also billed to Catalist-listed firms.
One executive from a now-delisted mainboard-listed company tells The Edge Singapore that the total cost of getting a listing in Singapore is relatively high, especially for small companies intending to raise a few million dollars. This could deter some from listing, adds the executive, who spoke on the condition of anonymity. “The woes of SGX have been talked about in the media quite frequently in the last few years, [which has] harmed its reputation and image and probably deterred many from listing in it.”
SGX is also slow in implementing what is needed, says the executive, citing dual-class shares as an example. Most tech founders insist on creating dual-class shares — where some shareholders have superior voting rights — to ensure control even after listing.
SGX only relented in 2018, close to two months after Hong Kong announced a similar end to the “one-share-one-vote” structure. The local bourse made the announcement after two rounds of public consultations.
“After they realised it’s costing them to lose out on the big tech company listings, they relented and implemented it with certain conditions,” says the executive. “Too bad — a bit late.”
In 2015, SGX lowered the minimum board lot size from 1,000 to 100 shares. This change was implemented to make stock investments more accessible to retail investors by reducing the capital needed to invest in listed companies. This attempt to improve liquidity ran counter to the advice of the stockbroking industry, the executive claims.
Many listed companies then ended up with scores of shareholders holding below 1,000 shares — a result of shareholders selling their holdings in the thousands, leaving the hundreds behind.
Meanwhile, in January 2023, SGX introduced a guideline regarding the independence of independent directors (ID) on the boards of listed companies. Under this rule, an ID who has served on the board for nine years or more will no longer be considered independent unless the company can justify their continued independence and seek shareholder approval through a two-tier voting process.
This followed a recommendation by the Singapore Institute of Directors (SID), claims the executive. “It’s like asking the barber whether you need a haircut. When most companies retain their IDs who have served more than nine years, [SGX] blames the companies for giving boilerplate reasons. Then, [SGX] came out with a new rule that minority shareholders must approve [the extension]. When almost all minority shareholders voted for retaining their IDs with more than nine years of service, they blamed the companies for taking advantage of the rule. After over a decade, they now make it mandatory,” adds the executive.
SGX last raised its mainboard listing fees in 2013. This revision doubled the minimum initial listing fee from $50,000 to $100,000 and increased the minimum additional listing fee from $5,000 to $30,000. Additionally, the ongoing annual listing fees increased from $25,000 to $35,000, with other variable components adjusted accordingly.
Compared to competitor bourses, an initial listing on the Hong Kong Stock Exchange’s (HKEX) Main Board and Bursa Malaysia’s Main Market incurs a minimum fee of HK$150,000 ($25,275.76) and RM50,000 ($15,213.00) respectively. In contrast, the annual fees for both bourses start at HK$145,000 and RM25,000, respectively.
On the other hand, there are grants and incentives available to IPO aspirants seeking a listing here. In 2019, MAS introduced the Grant for Equity Market Singapore (GEMS), which defrays up to 70% of eligible listing expenses for listing on SGX. Meanwhile, Enterprise Singapore offers 70% funding support for eligible Singapore companies to attend programmes to incorporate and optimise environmental, social and governance (ESG) values into their businesses.
Those grants, however, may not solve every problem. Helport AI, a four-year-old Singapore-headquartered artificial intelligence (AI) software firm, listed on Nasdaq in August. CEO Li Guanghai says the decision to list on Nasdaq was “part of a broader strategic effort” to tap into the “heart of AI innovation in North America”.
“Nasdaq offers access to a highly knowledgeable investor base, a robust ecosystem of tech-oriented analysts and a regulatory framework that promotes innovation while maintaining stringent compliance standards,” Li tells The Edge Singapore.
Li says his firm, which builds AI tools for call centres, is in “active discussions” with SGX for a potential secondary listing. “It’s important to clarify that our decision to list on Nasdaq should not be seen as a rejection of SGX. In fact, SGX has its own strengths, including a robust local investor base and a strong financial ecosystem. Our choice to list on Nasdaq was more about aligning with our strategic goals, particularly the need to tap into the North American market.”
SGX leaders speak
SGX Group CEO Loh Boon Chye said at the bourse’s 25th annual general meeting on Oct 10 that the cash equities business remains key to SGX’s strategy, and its leaders remain committed to growing it.
Loh sought to assure shareholders that the stock market “remains high” on management’s agenda. “It is an important pillar of Singapore’s financial ecosystem. We’re hopeful that our cash equities business will improve when all quarters of the ecosystem rally together to structurally improve liquidity and trading.”
One shareholder asked if SGX is ensuring its designated market-makers and brokerages focus on smaller-cap stocks to drive liquidity.
Loh said SGX’s market-making efforts are “not entirely geared towards just the index stocks”. “The whole purpose is to obviously look beyond the index stocks, and today they cover up to about 250 stocks.”
This comes with encouraging research beyond the popular index constituents to build a following, added Loh. “We do periodically review those with the market-makers, and we adjust based on where the volumes are lacking and where we like to see a bit more trading liquidity.”
The same shareholder also asked how the review group might stimulate demand for cash equities, citing a point made in SGX Group chairman Koh Boon Hwee’s letter to shareholders in SGX’s latest annual report, released Sept 16.
In his letter, Koh said that previous attempts at addressing the stock market issues had been “incremental and focussed on the supply side”. “We need to be more holistic in our approach and, more importantly, give equal emphasis to the demand side of the marketplace. It requires concerted effort from all quarters.”
Koh is among the 10 members of the review group. Thus, the shareholder also asked for Koh’s personal views on whether large institutional investors like Temasek and GIC should be called upon to invest in SGX-listed companies.
In response, Koh said the SGX cash equities market “is basically a market”. “We can neither create supply nor can we create demand.”
Instead, what the market needs to become more “vibrant” is to develop an “infrastructural, institutional ecosystem” with buyers and sellers, said Koh, who was appointed chairman at the start of 2023. “It needs to be institutional because that usually leads to liquidity and price recovery in the market.”
He added: “All of these issues that you have raised are being actively discussed… We don’t have a solution today. The review committee is still working [on it].”
Foreign competition
Meanwhile, Singapore Exchange Regulation (SGX RegCo) CEO Tan Boon Gin thinks efforts to improve corporate governance here could make SGX more competitive. “Corporate governance is not an end in itself. It is a means to an end,” he adds.
Speaking in September at an SID briefing on corporate governance, Tan says there are two parts to this rationale: the competitive element and access to capital.
The first part — the competitive element — applies to both seekers and providers of capital. A share structure with dual-class shares, for example, has become “increasingly normalised for investors” overseas, says Tan.
“It is no secret that our biggest new economy companies have chosen to list in the US using a dual-class share structure, nor is it a secret that such structures have become increasingly normalised for investors. In the same way [that] Europe has recognised [it], we can rail against the tide, or we can have a dual-class share regime for such companies to come home or stay home,” says Tan.
He cites special purpose acquisition companies (spacs) as another example of SGX keeping abreast of market trends.
However, spacs in Singapore have seen a less favourable fate. Three spacs were listed on the exchange around the same time in January 2022, but only one managed to de-spac — Vertex Technology Acquisition Corporation (VTAC) — acquiring live-streaming platform 17Live.
The other two spacs, Novo Tellus Alpha Acquisition (NTAA) and Pegasus Asia ended up returning their capital to shareholders, blaming unfavourable market conditions for hindering their acquisition plans (see sidebar on Page 9: Singapore never got to see its own spac frenzy).
However, Tan believes that spacs still have a spot in SGX. He adds that they were designed to address the valuation gap that new economy companies often face because investors here are less familiar with such companies.
While the dual-class share and spac frameworks have come under scrutiny, Tan believes sufficient safeguards are in place. “We have sought to achieve the elimination of a competitive disadvantage judiciously and in the overall interests of market participants.”
The Japanese approach
Tan also draws a link between corporate governance and access to capital. In his speech, Tan says: “For too long, we have been told Singapore companies are unexciting when really, they are perhaps simply just too shy for their own good.”
Tan references the Japanese market, which he believes has taken a prescriptive approach by applying more direct pressure on boards. Japan started efforts in 2022 to “address low valuations of issuers, reduce mountainous cash piles and enhance shareholder value”. For instance, listed companies must publicly disclose plans to improve capital efficiency, return on equity and price-to-book ratios. Those that fail to do so are named and shamed.
“Japanese listed companies have been responding to this greater demand for accountability as responsible stewards of their investors’ capital, and all investors, including retail investors, have benefitted,” says Tan, noting that SGX has received feedback to enact similar plans here.
According to Tan, this is a “virtuous circle” when investors reward Japanese companies that improved by “pouring into the market and propelling their share prices to new highs this year”.
Tan says Singapore has also embarked on “our own ‘value-focused’ initiative” to enhance shareholder value. “This predates, but will hopefully dovetail with, the efforts of MAS’s equity market review group.”
SGX RegCo uses a three-pronged approach, starting with a focus on promoting board renewal and diversity. This includes capping the tenure of independent directors, as mentioned above, and mandating a board diversity policy.
The second is to encourage market discipline by making it easier for shareholders to requisition meetings. Tan acknowledges that the market typically associates “market discipline” with the thought of investors punishing a company’s board or the share price when they disagree with what they are doing. However, the upside of market discipline is equally important; investors can be encouraged to reward a company when they are happy with what it is doing, he adds.
According to Tan, the third and final prong is to remove any market friction that gets in the way of such improvements. “We are aware of the feedback from the market that the public trading queries that we issue following an unusual movement in share price can have a chilling effect on the market,” he says.
Companies have also been reluctant to engage with analysts, investors and the media to avoid accusations of selective disclosure or drawing unwelcome queries from SGX RegCo if any forward-looking statement is published.
“As you must have noticed, the number of trading queries issued has decreased as we fine-tune our regime to make it more targeted,” adds Tan. “We have also launched a review of the public query regime itself. I must, however, emphasise here that the rigour of our trade surveillance remains intact.”
Not all market observers share this optimistic outlook. Commenting on Tan’s speech, professor at the National University of Singapore Mak Yuen Teen says SGX RegCo “should not just cite some feedback from the market to drastically dial down its responsibility for surveillance and enforcement”.
In a LinkedIn post, Mak questions the data suggesting that SGX RegCo’s trading queries have had a chilling effect on the market. “I tend to think otherwise — that companies should respond quickly and provide more timely information so that the market is more efficient and better informed. So, I still need to be convinced as to why reducing public queries will help value-focused activities. Our problem may be that companies are not paying enough attention to truly value-creating activities.”
Mak is sceptical about efforts to transplant the Japanese approach here. “There’s little institutional activism here to push companies to increase shareholder value,” says Mak in a separate post on LinkedIn about The Edge Singapore’s interview with ComfortDelGro C52 ’s (CDG) chairman, published Oct 4. “There’s more shareholder activism in Japan. In CDG’s case, there’s just one substantial shareholder holding less than 10% and with little activism, it’s hard to hold the board accountable.”
Securities trading up in September
In a bright spot, SGX marked the third straight month of reporting a strong set of securities trading data in September. During the month, the exchange’s total market turnover value rose by 75% y-o-y and 5.6% m-o-m to $30.38 billion. According to data released on Oct 9, September’s securities daily average value (SDAV) increased by 67% y-o-y and 5.6% m-o-m to $1.45 billion. Both measures were at their highest since May 2022.
The increase in trading activity was perhaps partly due to the US Federal Reserve’s (US Fed) highly anticipated half-percentage point rate cut on Sept 18.
September’s monthly statistics beat analysts’ expectations. For instance, DBS Group Research analyst Lim Rui Wen upgraded her call to “buy” from “hold” as she notes that the exchange is “firing on multiple fronts” after its “strategic investments” in platforms such as Trumid, BidFX and Cobalt. Trumid is a fixed income trading platform, while BidFX is a forex electronic trading solutions provider. Cobalt FX is a post-trade processing network.
“We believe the culmination of such efforts, if delivered with scale, will help propel SGX to complete its multi-asset strategy, which can also help in mitigating market cyclicality,” she writes in her Oct 10 report.
According to Lim, the strong growth momentum is expected to continue in the following months due to market volatility due to the US presidential election in November, China’s stimulus package and economic outlook, and tensions in the Middle East.
“Amidst a backdrop of US Fed cuts, we believe more flows towards emerging markets like Asean, and yield stocks, will also likely benefit SGX’s securities trading volumes,” she writes.
Year to date, SGX’s securities trading segment has accounted for 14% of the exchange’s total revenue. As such, Lim now expects to see a “more favourable” trajectory for SDAV going into FY2025. She also hopes to see “strong growth” in derivatives volumes amid market volatility.
Lim notes that the ongoing review by the MAS is a “potential tailwind”. “SDAV has been known to be a key driver of SGX’s stock price, as it translates into commissions and revenues,” she says. “Any positive developments arising from the MAS review group to rejuvenate the markets could further propel its share price, as we believe the market has yet to price in growth from increased securities trading activity arising from the MAS review.”
In addition to her upgrade, Lim has increased her target price estimate to $12.80 from $10.20 previously. She has also raised her earnings estimates by 5% for FY2025 to FY2026 due to improved trading volumes across all asset classes.
Citi Research’s Tan Yong Hong, who kept his non-consensus “buy” call on SGX with an unchanged target price of $12.70, says he expects to see “some” EPS upgrades if market volatility is likely to remain on the back of the global central bank’s pivot and optimism from China.
Revitalising market ‘not an easy task’: Chee Hong Tat
MAS’s review group is chaired by the Minister for Transport and Second Minister for Finance Chee Hong Tat. Despite some market optimism over the launch of the review group, Chee acknowledged that the task to revitalise Singapore’s equities market is not easy with “global headwinds” and “increasing competition”.
In his speech at the Securities Investors Association Singapore’s (Sias) 25th Anniversary Corporate Governance Conference on Sept 16, Chee admitted that not all ideas derived from engagements with shareholders will succeed. However, the group is prepared to take “some calculated risks”.
In doing so, he said the group will remain focused on Singapore’s strengths and its value proposition to investors and the companies seeking to list. “Our objectives are clear: to develop an equities market that provides an attractive venue for local and regional enterprises to access funding and support for their innovation and expansion plans.”
After all, having a strong equities market is important as it provides a venue to facilitate successful IPO exits. Such exits allow private equity and venture capitalist investors to recycle capital into other start-ups and early-stage growth companies, which completes a “virtuous cycle of growth, innovation and a more vibrant financial market”, Chee said. “These are important elements of our business ecosystem to support a competitive economy”.
While SGX has been doing well in certain areas, such as equities derivatives and fixed income, currencies and commodities (FICC), the review group is focused on building up the supply of good companies and creating a strong financial ecosystem to support these companies’ growth.
To do so, SGX must have a broader range of products to attract demand from a larger pool of investors.
Chee notes that Singapore is the largest REIT market in Asia ex-Japan because it recognised a market need and created a “supportive regulatory framework and ecosystem”. He believes there can be “other such opportunities” for SGX.
For instance, the minister suggests that the exchange can be a “trusted venue” to facilitate investor flows into mid-sized regional companies. Singapore should also provide a platform for companies to raise funds and support their growth.
So far, the group has identified several ideas, which can be grouped into three main areas: encouraging the pipeline of quality listings, enhancing investor participation and broadening market liquidity, and re-evaluating regulatory structures and approach.
With over 4,500 tech start-ups, 400 venture capital firms and 240 incubators and accelerators in Singapore, he hopes firms based here could consider listing on the local bourse.
“We will look at the incentives to encourage listing and to reduce the costs of listing to lower entry barriers,” he added. “There is also scope to explore attracting growth companies from emerging markets in certain niches such as fintech, innovation and sustainability. Such companies could benefit from raising capital in a trusted, open market venue like Singapore.”
Another focus is catalysing the secondary private fund sector to better support late-stage start-ups before they consider an IPO. This suggestion comes amid the current venture capital funding winter, where more start-ups are listing before they are “ready for the scrutiny of public markets”, says Chee. “These companies are looking for alternative markets to maximise the valuation for their investors seeking exits.”
To further boost the equities market, the group is also looking to expand research coverage of targeted sectors before and after they go public.
“Research provides visibility and bridges information asymmetry, helping companies attract investors and capital. It also generates investor interest and supports their decision-making when these companies are ready to transit from being privately held to publicly listed,” he said.
The group also seeks to expand market liquidity in counters apart from the 30 large-caps that make up the benchmark Straits Times Index (STI).
Some of the ideas include incentivising market-makers to facilitate price discovery, broadening stock indices and expanding the pool of equity market derivatives, the minister added.
“Over time, additional rules and safeguards have been introduced to protect investors, mitigate risks and uplift market practices,” said Chee. “The moves were made with good intentions, but with the passage of time and new technological and industry developments, we need to ask ourselves if these rules and regulations are still relevant and required.”
He added that the group must “have the courage” to take some risks and make the changes. For instance, the group has suggested streamlining the prospectus disclosure requirements to lighten the compliance burden for companies listing on SGX. “The review group will take a careful look at our regulatory regime and, where necessary, prune regulations that may no longer be necessary or pose a disproportionate regulatory burden.”
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