Last week, a new review group made up of 10 leaders from the public and private sectors was set up to improve Singapore’s equities market. This comes months after reports emerged that the local bourse is considering proposals to revive the stock market, including a proposal put forward by the Singapore Venture and Private Capital Association (SVCA). In June, The Edge Singapore (Issue 1142) spoke to heads of companies, brokers, analysts and remisiers for a cover story about stimulating the moribund local market.
The review group was announced at a media doorstop at the Singapore Exchange S68 (SGX) on Aug 2 by Chee Hong Tat, the Minister for Transport, Second Minister for Finance and board member of the Monetary Authority of Singapore (MAS). Chee, who was appointed deputy chairman of MAS in late July, will chair the group.
“We have been talking to different stakeholders over the past months. And I think everyone can see that there is a need for us to do something to improve the situation that we face today in Singapore, to make listings in Singapore a more attractive option for companies,” he says.
The review group will cover three main areas. These include a look into attracting and grooming a good pipeline of companies, creating a more vibrant and liquid marketplace, and reviewing the regulatory framework and structures that will be pro-business and pro-investors. Discussions on how to encourage more local and foreign companies to list on the exchange will take place and solutions such as tie-ups with other exchanges may result, Chee adds.
The group aims to release its recommendations within a year.
Two advisory workstreams will be formed — the enterprise and markets workstream chaired by Lee Chuan Teck, chairman of EnterpriseSG; and the regulatory workstream chaired by Chia Der Jiun, managing director of MAS.
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Lee will focus on studying and recommending market-supportive measures, while Chia will examine enhancements to Singapore’s regulatory regime to support the “sustainable growth of the market” while safeguarding investor confidence.
An SGX spokesperson says the launch of the review group highlights the vital role that the equities market plays in Singapore’s long-term economic growth and its ambitions to be a leading international financial centre in Asia.
“Only a whole-of-ecosystem approach can lead to transformative actions that will give fresh impetus to improving liquidity and listings in Singapore’s equities market. We will work closely with the review group, alongside our ongoing efforts to enhance our marketplace through new products, research and education, issuer and investor outreach, as well as regional partnerships,” says SGX.
Market players chime in
Other members of the review group include Temasek Holdings CEO Dilhan Pillay; Koh Boon Hwee, chairman of SGX; Png Cheong Boon, chairman of the Singapore Economic Development Board (EDB); Euleen Goh, chairman of the Singapore Institute of Management (SIM); Lai Chung Han, permanent secretary, development, Ministry of Finance; Lim Ming Yan, chairman of the Singapore Business Federation; and Neil Parekh, partner and head of Asia, Australia and New Zealand, Tikehau Capital. Parekh is the only committee member from the private sector.
Explaining the composition of the committee, Chee says there is a “limited number of places” and there “needs to be good representation from different stakeholder groups”.
Chee was questioned about the role of investment firms Temasek and GIC. Market participants have debated if the two should be called upon to inject capital into the bourse for a flush of liquidity. The minister reiterated that both firms have a mandate to look at what will give them, as investors, the best returns.
In 2022, the Singapore government and Temasek set up Anchor Fund 65 and EDBI set up the Growth IPO Fund to support “promising high-growth companies” and encourage their listing on the SGX. The funds have both invested more than $500 million in nine companies till date.
At a parlimentary session on Aug 6, Minister for Trade and Industry Gan Kim Yong said that the two funds may encourage more promising companies to list on SGX, but they are not a silver bullet.
He adds that the fund managers of the two funds will advise these companies on the listing requirements of the SGX, facilitate engagements with investment banks and advisers, and plan a viable timeline for listing based on the company’s growth strategy and prevailing market conditions. But the call on when and where to list remains a commercial decision for each company to make.
Last month, Temasek International’s head of financial services Connie Chan said in response to questions from The Edge Singapore that the investment firm’s mandate is to generate long-term sustainable returns and not to stimulate trading on the local bourse.
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However, David Gerald, founder, president and CEO of the Securities Investors Association Singapore (Sias), says Temasek and GIC should be agnostic. “If good companies trading at good valuations exist on the SGX, local sovereign funds should consider them.”
Gerald also suggests the review group follow the lead of Japan and South Korea, which started efforts to improve the valuation of their listed issuers in 2022 and 2024 respectively.
Listcos in Japan are required to do more to unlock value from the perspective of the investors. According to Tokyo Stock Exchange (TSE) disclosures, 50% of the stocks listed on its Prime Market traded below book value as of Sept 30, 2022. After the start of its “Value Up” programme in 2023, this ratio improved to 36% as of April 15. TSE requires boards to enact policies to improve capital efficiency metrics and market valuations, especially for listcos trading below book value.
CGS International analysts, led by William Tng, suggested similar steps in May. They think SGX should mandate that listcos issue dividend policies with target payout ratios and set return on equity targets after calculating their cost of capital. Listcos should also promote analyst coverage of their stock and make investor relations activities a key performance indicator for management, says CGSI.
They add that SGX should consider a clear share buyback policy and cancellation of shares bought back more than those required for employee stock options schemes. The exchange should also encourage C-suite and directors of listcos to demonstrate confidence in their own company by buying shares in the open market. In this way, CGSI believes they will be incentivised to create long-term shareholder value.
In its paper, the SVCA suggests requiring private funds booked here to invest in the local market and getting Singapore’s pension and sovereign funds to emulate the practices of their Australian and Thai counterparts.
Take reference from London
Singapore’s new review group could be similar to the UK’s Capital Markets Industry Taskforce (CMIT), a group established in August 2022 to help drive the reform of the UK capital markets.
Chaired by London Stock Exchange (LSE) CEO Julia Hoggett, the group includes GSK’s chairman, Schroders’ CEO and KPMG’s strategy head. CMIT members have met monthly since July 2022 and published their meeting minutes online. One hopes for such transparency from the local group.
CMIT has so far suggested plans to reform the UK’s listing rules, merge two segments of the main market, boost sell-side research, encourage the deployment of risk capital, improve corporate governance and scale “consequential private companies”.
The UK’s Financial Conduct Authority adopted most of these suggestions last month. On July 29, LSE merged its “premium” and “standard” listing segments into one overall category for equity share listings and did away with requirements for IPO hopefuls to submit historical financial information, revenue track records and clean working capital statements.
