Fred Perry, a tennis player who retired in 1939, may have much to teach the Singapore Exchange S68 (SGX). Fred Perry was from an English working-class family. His father was a textile factory worker.
Perry overcame the class prejudices of his era. He was blessed with height and iron wrists. He towered over his opponents at 6 foot 3 inches in an era where the average tennis player was 5 foot 9 inches. He had vast reserves of stamina. He once wilted down an opponent over a six-hour match during a heat wave in Paris.
In those days, tennis was not played in shorts. Perry used to wear white flannelled trousers and shirts. His attire was similar to that of today’s cricketers.
The dress code did not prevent Perry from dominating the sport. He was like the Roger Federer of his day. Perry won the grand slam in 1935. By 1936, he had won Wimbledon three times.
After Perry, British tennis suffered. Perry was the last Briton to win the event for 77 years. Britain hosts the world’s marquee tennis tournament. The gala event generates US$10 billion ($13.4 billion) in revenue annually. Wimbledon generates riches for London, but British players keep losing.
The Wimbledon syndrome could be an apt description of SGX. Singapore has emerged as one of the world’s greatest financial centres. Raffles Place is the capital of the world’s private wealth market.
In the same way, the world descends on Wimbledon every year, and family offices are jostling for a presence in this city. Private banking AUM in Singapore has risen four-fold in the last decade.
Singapore is a haven due to the business-friendly and low-tax market. It only takes a few minutes to file taxes in Singapore. Investors respect the rule of law in this city.
The country’s success as a financial hub has not flowed into the stock market in the same way the British tennis players have suffered. SGX seems to be a moribund market. The daily turnover for securities is around $1 billion, a fraction of the level in 2007. There are just a handful of stocks that trade more than US$20 million. The Hong Kong Exchange has over 100 such stocks.
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SGX has a poor relationship even within Asean. Singapore is a much richer country than Thailand. The GDP per capita is more than 10 times Thailand’s. However, SGX cash equity volumes are less than a third of those of the Stock Exchange of Thailand.
Over 400 of the 650 stocks on SGX are trading below their book value. There are 73 companies that are trading below their net cash.
The most liquid stocks on the market are the ones controlled by Temasek. These include Singapore Airlines C6L (SIA), SingPost and Singapore Telecom. REITs represent about a fifth of the volume. However, the S-REIT index has been down 30% in the last two years due to rate hikes.
Singapore’s ambitious tech companies are avoiding listing here. Grab completed the largest spac listing in history in December 2001. It took place on the Nasdaq. Carsome, a car retailing platform which has emerged as Malaysia’s first unicorn, seems to be averse to an SGX listing.
Why is SGX floundering? It faced a different kind of racket than the one that Perry wielded. From 2012 to 2013, a market manipulation scandal was unearthed by the authorities known as the penny stock scam.
Two investors were found guilty of inflating the share prices of three penny stocks — Blumont, Asiason and LionGold. The scandal erased $8 billion in market capitalisation. Disclosure issues involving commodity trader Noble emerged from 2015 to 2017.
Also, Singapore does not have domestic support as Perry did in the 1930s. GIC is one of the largest sovereign wealth funds in the world. But, it does not invest in the domestic market. The CPF has abundant capital from people’s pensions. The CPF trading volumes do not have an impact on market volume.
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There needs to be CPF support for the market. The Employees’ Provident Fund or EPF, Malaysia’s equivalent to the CPF, can be responsible for a fifth of the volumes on Bursa Malaysia (previously known as the Kuala Lumpur Stock Exchange).
Fred Perry’s success in the court was backed by public support. The public thronged to watch him. The queues for the Wimbledon centre court used to extend for miles. British businesses also backed him to the hilt. Fred Perry created a fashion brand which is still popular.
SGX needs to unearth champion companies. The country’s own sources of capital should back the market. SGX companies require support beyond the court to win.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era
