MSCI Global Investable Market Indexes (GIMI) are indexes weighted by market capitalisation. According to MSCI, the weight of index constituents is determined as a ratio of its free float-adjusted market cap relative to the total free float-adjusted market cap of all index constituents of the index. Therefore, the weight of a country in a composite index is the sum of the weight of all index constituents that are classified in that particular MSCI Country Index.
As part of the May 2024 Index Review, which used April 19 stock prices, the weight of the MSCI Singapore Index in the MSCI World Index is 0.34%, compared to 0.36% before the rebalancing. The five stocks that were dropped on May 31 were City Developments, Mapletree Pan Asia Commercial Trust N2IU , Mapletree Logistics Trust M44U , Seatrium and Jardine Cycle & Carriage C07 . They were dropped as they were the ones with the lowest free-float market caps. If the Singapore market remains moribund, the next stock on the list that could be dropped is Sembcorp Industries U96 .
One of the reasons Singapore’s free-float market cap fell more than the MSCI GIMI is because of greater liquidity and interest elsewhere in Asia and globally. Within Asia, only India had net additions. However, free-float market-cap levels rose in places like Japan and Taiwan. China had 56 deletions and 10 additions.
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How can Singapore’s weightage increase? “Assuming all index constituents remain the same, securities that outperform would see an increase in weight. Adding more securities would also lead to an increase in the weight of the relevant MSCI Country Index relative to others within the composite Index,” MSCI says.
With equities struggling to grow interest, the Singapore Exchange S68 (SGX) and related financial institutions have tried introducing new products. SGX’s ETF (exchange-traded fund) programme has led to new ETF listings but as the regulators themselves are aware, liquidity remains lacklustre. ETFs have some attraction for investors interested in passive investing.
They are also a way to garner interest from investors and professionals who have little time to do individual stock selection. ETFs are one way to get a larger investor base and could even put the local market in a better position to attract the next big listing.
Whatever the case, ETFs are only an intermediate step to attracting more liquidity to the local market. Moreover, ETF issuers like OCBC Securities, Lion Global and Nikko Asset Management have gained a higher profile. But ETF issuers also need to help boost the liquidity of their listed ETFs.
It is probably a similar story for depository receipts. New types of depository receipts have been introduced now and again but they have failed to capture the imagination and pockets of investors in a big way. Some progress has been seen though. The Singapore Depository Receipts on Thai stocks have seen its highest net inflow last month, according to SGX.
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Some market observers believe that a “value-up” strategy adopted by South Korea and Japan could be a starting point to attract more investors into the Singapore market. According to an April S&P Global Market Intelligence report, South Korea’s Corporate Value-up Program plans to replicate the Tokyo Stock Exchange’s success in 2023 by incentivising companies to distribute more dividends. Successful value-up programmes by South Korea and Japan could encourage a value-up programme in Singapore.
“While pushing for a higher payout ratio is necessary, it will take a multifaceted approach for the Value-up Program to truly enhance the attractiveness of South Korean dividends. On the brighter side, South Korea’s economy is expected to be revitalised in 2024 with many top dividend payers’ earnings turning around, making it a favourable year to launch the Value-up Program. Our analysis also showed that the Kospi 200 is better placed than the Nikkei 225 in the earnings per share/dividend per share (EPS/DPS), free cash flow/dividend per share (FCF/DPS) and leverage ratios, thus having more room to increase dividends,” says S&P Global.
Writing for The Edge Singapore back in February, S Nallakaruppan, president of the Society of Remisiers, said Singapore needs the “Big Bang” listing of major Singapore companies such as Income Insurance, PSA International, NTUC Fairprice and Changi Airport Group (CAG). Unfortunately, instead of Income Insurance coming to market, Oversea-Chinese Banking Corp plans to privatise Great Eastern Holdings G07 . A REIT of Mapletree Investments’ portfolio of purpose-built student accommodation, another potential IPO candidate which is often mentioned, has not materialised. Mapletree Investments itself neither needs an IPO nor is it planning to have one.
“One thing that would help would be at least one or two prominent, splashy IPOs of big name, regional private companies, including but not limited to unicorn. Nothing creates interest like strong precedents,” concurs Usman Akhtar, senior partner and head of Bain & Company’s private equity practice in Southeast Asia.
This potential Big Bang IPO candidate with the largest international recognition is none other than CAG, which is privately held by the government. On June 6, CAG reported that earnings in FY2024 ended March 31 rose 13.1 times y-o-y to $431 million in the first year of full recovery following the pandemic. Revenue was up 45% to $2.7 billion.
With an NAV (net asset value) of $6.64 billion and at this level of earnings, CAG could easily list at around three times book and 15.4 times P/E, earning it a spot in the various market indices that matter. CAG would be somewhere between listed peers Airports of Thailand (AoT), trading at a P/E of 51 times and P/NAV of 7.5 times as at June 1, and Malaysia Airports Holdings Bhd (MAHB), trading at a P/E of 27 times and P/NAV of 2.3 times as at June 10. Alternatively, CAG could put its 51% stake in Jewel — which is managed by CapitaLand — into a REIT, once interest rates have subsided to achieve a bang that is smaller but still enough to make a difference to the Singapore market.
reporting for all stories by Nicole Lim, Goola Warden, Felicia Tan, Douglas Toh, Jovi Ho, Samantha Chiew, Khairani Affifi Noordin and Chan Chao Peh
