Singapore has kicked off a big effort to revive its withering stock market. Inside its exchange operator and among market participants, there is deep pessimism that the reboot will succeed.
The city-state’s government unveiled a task force in August to come up with ways to revitalise the $811 billion market, which lost its title as Southeast Asia’s largest after delistings far outnumbered initial public offerings.
But within Singapore Exchange S68 , there has been a sense of defeatism among staffers in the equity capital markets division, which is responsible for bringing in IPOs, according to people familiar with the matter. The group’s performance targets include more than doubling the number of new listings from seven in the last fiscal year that ended in June, and preventing more delistings, yet staffers believe the goals are unrealistic and impossible to achieve, the people said.
SGX management has envisioned a potential future where the exchange operator pivots away from cash equities and becomes more like Asia’s version of CME Group by focusing on derivatives, futures and options, the people added.
Another option that has been discussed internally is taking SGX private, which would reduce public scrutiny, according to one of the people. The derivatives business is growing and already generates the bulk of SGX’s revenue and profits.
Global investors, wealthy families and multinational companies have flocked to Singapore, bringing an influx of capital that has pushed up prices of private assets, real estate and luxury goods.
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But little of it has gone to the city-state’s equity market, which is struggling with poor trading liquidity and low valuations.
Investment bankers, deal lawyers, business owners and large and small investors are frustrated at how the market has languished for years.
There has been only one initial public offering on SGX in 2024, of a cancer therapy company that raised $26.2 million.
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The government has set a deadline of next summer for an action plan. Singapore’s next general elections — the first with Prime Minister Lawrence Wong leading the ruling party — have to be held by November 2025, and politicians are trying to burnish their reputation ahead of it.
The revival effort follows years of wrangling between SGX officials and Singapore’s top financial regulator, the Monetary Authority of Singapore (MAS), on how to fix the equity market’s problems, people familiar with the matter said.
SGX has implemented budget cuts across the organisation that have curbed overseas travel, the people added. Last month, the capital markets division’s co-head Matthew Song resigned after being in that role for only a year. The low morale is leading other staffers to consider leaving the exchange, the people said.
‘An outlier’
“The market has become irrelevant,” said Gerard Lee, a retired fund management industry veteran who is now non-executive chairman of the Singapore unit of Arabesque AI, a tech-driven investment advisory firm. “For a country that punches its weight on so many fronts, the stock market is an outlier,” he added.
Singapore’s Straits Times Index recently reached its highest level since 2007. But over the past decade, the benchmark’s return including dividends is just a quarter of the S&P 500 Index’s roughly 250% total return. Around 85% of the local market’s daily trading activity is concentrated among the 30 large-cap stocks that make up the STI.
Diminishing investor interest has led some asset managers to liquidate Singapore-focused equity funds or merge them with other regional funds. Even some of the real estate investment trusts that helped make the city-state’s market a dividend play are suffering from low liquidity and governance concerns. Many hedge funds and market makers have also backed away, resulting in a lack of meaningful price discovery.
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Mark Mobius, co-founder of Mobius Capital Partners, said his firm’s exposure to Singapore stocks is zero. “There is no question that Singapore is an important financial centre”, he said, but the equity market is dominated by banks, REITs and telecoms, sectors that he doesn’t consider attractive.
Market laggard
There has been a lot of finger-pointing about what went wrong with the stock market, and why it has been losing ground to other regional exchanges.
Many Singapore companies looking to go public have been deterred by the issues plaguing the local bourse, and prefer listing on stock exchanges in the US, Hong Kong, or even in neighbouring Malaysia. Indonesia now holds the crown of Southeast Asia’s biggest stock exchange, while Malaysia is enjoying a boom in new listings.
Some market participants say the Singapore government is to blame for not directing its large sovereign wealth fund GIC to invest some of its assets in local equities. Others have privately criticised regulators at SGX and MAS for being too risk averse, conservative and overly protective of retail investors.
In 2021, state investment company Temasek Holdings set up a unit called 65 Equity Partners to invest in local firms, and has yet to list any of them on SGX. One of them, an immersive entertainment company called Neon, is considering a Singapore IPO next year that could raise up to $500 million, Bloomberg News reported this week. Temasek also holds stakes in many Singapore-listed companies.
Regulatory wrangling
The SGX and MAS haven’t seen eye to eye on how to tackle the stock market’s challenges, people familiar with the matter said. Past stock-market scandals, including a 2013 crash in penny stocks and accounting misdeeds at China-based companies listed in Singapore, led regulators to tighten listing requirements and impose rules aimed at preventing market manipulation.
Most exchange rule changes and listing applications also have to be approved by MAS, and reviews have often been long and tedious, the people said. Back in 2021, a new listing framework for special purpose acquisition companies in Singapore took so long to be green-lighted by regulators — who wanted guardrails to protect retail investors — that SGX ended up missing out on a global boom in SPACs.
Exchange officials previously proposed that capital could be channeled into the stock market from family offices based in Singapore, if regulators require them to invest a portion of their portfolios in locally listed stocks, the people said. That was shot down by the MAS, the people added, because there is an existing rule that requires family offices to invest 10% of their assets or US$10 million — whichever is less — into a wide range of investment products that includes local equities, in order to qualify for tax incentives.
“We believe that open dialogue between companies, market participants and regulators leads to better outcomes for the industry and ecosystem. We are very much aligned with MAS in seeking to collectively strengthen market development,” an SGX spokesperson said in response to questions from Bloomberg News.
An MAS spokesperson said the regulator “works constructively with SGX and other industry partners on strengthening equities market development in Singapore, and is actively supporting the Equity Market Review” being led by Chee Hong Tat, Singapore’s Second Minister for Finance.
“There may be areas where the risk appetite in the system has fallen in response to market failures, and it is useful to relook and recalibrate our approach,” Chee, who is also MAS deputy chairman, said on Sept 16. “We are prepared to make bold changes but we want to do so after we carefully assess the trade-offs.”
He said regulators could “prune” regulations that are outdated or overly burdensome. The group’s other goals include developing a good listing pipeline, getting more investors to participate in the market, and improving market liquidity. One big worry is that the stock market weakness will hurt private fundraising opportunities for local companies, because investors don’t have an easy way to cash out in the future.
Public funds
There have been calls from many market participants for the government to allocate a portion of Singapore’s public pension funds into local equities or professionally managed funds that invest in them. In Japan, Australia and Malaysia, national pension funds have provided a steady stream of capital for their domestic equities, which has helped to bolster stock valuations and make them more attractive to foreign investors.
In Singapore, the Central Provident Fund’s money is indirectly invested by GIC via a commingled pool with other government funds. The sovereign wealth fund, which is estimated to have more than $800 billion in assets under management, has long maintained that its mandate is to invest globally. About 39% of its investment portfolio was in the US at the end of its last fiscal year.
“Directing GIC to invest in locally listed companies is not the solution,” Chee said in early July in response to a question in parliament. “Doing so will compromise our objectives for setting up GIC, which is not beneficial for Singapore and Singaporeans,” he added. GIC recently reported annualised five-year nominal returns of 4.4%, and a 5.8% annualised return over a 20-year period.
The stock market conundrum has been a headache for SGX CEO Loh Boon Chye, who once told colleagues that it occupies his mind while he jogs on the treadmill and is “what keeps him awake at night”, one of the people said. Loh, who was nicknamed “flow monster” when he worked at international banks, has run SGX since 2015.
For years, the view of Singapore authorities was that having a strong equities business wasn’t a priority for the exchange, according to the people familiar with the matter. Zurich and Dubai are among the international financial hubs don’t have large stock markets, while London has been losing its charm as a listing destination for years.
For now, the focus is on trying to revive the stock market. Other potential solutions being discussed by the new task force, which includes private- and public-sector representatives, include asking fund houses to launch more Singapore-specific products, increasing research coverage of listed companies, and ways to get more mom-and-pop investors to trade stocks again.
“Participation by retail traders has been weak in recent years. The situation has become so bad that even institutional investors currently have limitations in accessing the market,” said James Leong, CEO at Grasshopper, one of Singapore’s biggest market makers. He said retail investors need to be wooed back in order for the market ecosystem to function properly.
“We have done a good job in attracting good-quality companies to set up shop here. But when it comes to encouraging them to list, our market will need a more sizable effort,” said Tay Hwee Ling, accounting and reporting assurance leader at Deloitte Southeast Asia.
Lee, the retired fund-industry executive, said the concerted effort to revitalise the stock market could result in some improvements. “It can do better than what it is today, but I’m not sure we can end up with a flourishing market. I think that’s a pipe dream,” he added.
