It is “evident” that the Singapore Exchange S68 ’s cash equities business “needs more work”, according to SGX Group chairman Koh Boon Hwee.
In a letter to shareholders from the bourse operator’s latest annual report, released Sept 16, Koh writes: “Some may argue that the stock market is only one aspect of our financial ecosystem, but it is more like a pillar. And we should recognise that if this one pillar were to falter, the whole is put at risk.”
Notably, this is the first time since the FY2010 annual report that the SGX chairman has issued a separate letter from the CEO of the exchange. The FY2024 annual report comes a month after the Monetary Authority of Singapore launched an equities market review group, which will propose ways to stem a series of delistings here and revive the listing venue.
Koh says he is “grateful” for the review group, which will “take a holistic view of the issues”.
According to Koh, previous attempts at addressing the issues of the stock market have been “incremental and focused 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.”
The success of the stock market is dependent on multiple factors, says Koh, “some of which are outside the control of SGX Group”. “Our purpose is to serve as a trusted and efficient marketplace. We have worked hard to put in place an accessible venue that facilitates the exchange of capital and ideas. But the venue itself cannot create supply or demand. Other factors are necessary to bring about the vibrancy that is needed.”
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Koh says Singapore market players “must learn to accept market volatility and the occasional challenges that come with it”. “With volatility comes active trading. And active trading in turn enhances liquidity. A highly liquid market drives valuation, paving the way for IPOs. These things are all interlinked. But to achieve this, we require greater diversity in the demand side of the equation.”
This includes fostering an institutional asset-management ecosystem that includes the local stock market, says Koh. “Without domestic institutional demand, we cannot expect to see foreign institutional demand. Only when we support our own stock market, can we attract foreign companies to list here. After all, if we do not support our own market, why should we expect others to do so?”
CEO’s letter
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Overall volumes for SGX’s cash equities market were subdued in FY2024, says SGX Group CEO Loh Boon Chye in his letter to shareholders.
“While we saw signs of volumes improving in the second half of the financial year, more needs to be done to structurally enhance liquidity and listings. A more holistic approach with efforts from all stakeholders is required for real change to take place,” he adds.
Says Loh: “We will work closely with the review group set up by the Monetary Authority of Singapore and our stakeholders, alongside our efforts in product development, research and education, issuer and investor outreach and regional partnerships.”
Shares in SGX closed 12 cents lower, or 1.07% down, at $11.11 on Sept 16.
