Singapore is considering proposals to revive its struggling stock market as the gap between the financial hub’s performance and that of other regional bourses widens.
The Singapore Exchange (SGX) is currently reviewing a document from the country’s venture and private capital association, according to three people familiar with the discussions. The Singapore Venture & Private Capital Association (SVCA) includes sovereign wealth funds GIC and Temasek, local and global venture firms and buyout groups such as General Atlantic, Warburg Pincus and KKR.
Discussions have been ongoing since the beginning of the year, the people added, and the SVCA’s proposals are also being considered by the government’s Economic Development Board, the Monetary Authority of Singapore and the Ministry of Trade and Industry.
The government did not commission the document but it emerged as it discusses policy changes with SGX to boost the stock market. The pair are responding to the next wave of Southeast Asian companies – such as Singapore-based automotive marketplace Carro – choosing the US over Singapore to list.
“There has been a shift in the government’s perception that this is not just an SGX issue but also important to Singapore’s national agenda. Is it possible to be a comprehensive and relevant international financial center with an anemic stock market? Maybe not,” said an industry executive involved in the discussions.
A person involved in drafting the document, who did not want to be named, said they had not seen “a whole-of-government, cross-sector approach like this since Singapore first decided to create a technology and industry approach in the late 2000s.” to promote the venture capital industry.”
“For the first time, they appear more willing to consider more idiosyncratic, aggressive steps, such as investing pension money – which is normal elsewhere but new to Singapore.”
SGX chairman Koh Boon Hwee, appointed last year, has been highly involved and is more willing to hear new perspectives, the people said. Koh, a business veteran in the city-state, has also served as chairman of telecommunications group Singtel, the city’s largest bank, DBS, and Singapore Airlines.
The MAS said it had “received the proposals and is considering them”. SGX, EDB and MTI declined to comment.
Singapore has emerged as a financial hub in recent years, boosted by Chinese President Xi Jinping’s crackdown on rival economic hub Hong Kong and record inflows of private wealth and capital into the island nation, seen as a haven for its stability and stability became a business-friendly market with low taxes.
But the government’s success in private markets never affected the stock market – even as more new economy and technology companies set up headquarters in Singapore.
SGX is suffering from low volumes and questions about corporate disclosure practices. Delistings are often more numerous than listings. The stock market has a high concentration of companies in which state investor Temasek has a large stake, as well as asset-intensive companies such as real estate investment trusts, which have faltered in recent years amid higher interest rates.
According to PwC studies, the stock market was one of the quietest in the world in terms of deals and funds raised last year, with $7 million and $300 million respectively. The poor performance has worsened as regional bourses prepare for an IPO revival as macroeconomic conditions improve globally.
In terms of the total number of IPOs, the Indonesian stock exchange was among the top five stock exchanges in the world in 2023. India recorded its highest number of IPOs since 2017 last year at 234, up 56 percent from 2022, while private investors favored shifting more capital there over China.
Japanese stocks broke a bubble-era record last month while the Hong Kong Exchange appointed new leadership as the city struggles to maintain its status as a major financial center.
“There is a growing fear that even some private capital may leave Singapore to be closer to these faster-growing markets, particularly India,” said a Singapore-based venture capital partner with the government and SGX was consulted.
Among the proposed proposals is a requirement for equity participation in the stock market from the record amounts of private capital that have flowed into the city-state in recent years, such as family offices and other asset management companies.
There are also more politically sensitive proposals, such as mechanisms to allow pension and government money to be invested in the stock market, as is the case in Australia or Thailand, the people said. While Temasek invests in local companies, GIC, which manages the government’s foreign reserves, only invests internationally.
The government has also been closely monitoring policies in other countries, such as the United Kingdom, which is increasing pressure on pension systems to help companies grow, the people said. Like GIC, Singapore’s Central Provident Fund also has plenty of capital. Although retail investors can use their CPF money to invest in selected stocks, this does not change the volume. There is no government policy requiring or encouraging CPF investments in stocks more broadly.
Another proposal calls for greater cooperation with Southeast Asian stock markets, including the possibility for Singapore to later host a regional stock exchange and underpin any issues such as currency risk.
“Singapore loudly proclaims that it is an ‘innovation economy’ but has a pension system that is so risk-averse. Building that liquidity could incentivize fund managers,” said another person familiar with the discussions.
However, others questioned whether the latest attempt would be enough to reverse SGX’s trajectory.
“It is difficult to create supply and demand. “You really need to talk to market makers like local funds and asset managers and I still don’t see that,” said a Singapore-based hedge fund manager.
Previous efforts, such as collaborations with the Nasdaq and Tel Aviv stock exchanges to attract secondary listings or the introduction of a Spac regime in 2021, have not worked.
“It’s nice to have ideas and incorporate them into Singapore’s national agenda. But addressing poor disclosure practices or strengthening corporate governance to provide greater certainty to investors remain the bigger issues for us,” the hedge fund manager added.