Singapore has launched a major initiative to breathe new life into its faltering stock market, but insiders at the exchange operator and market participants express deep skepticism about the chances of success, reports Bloomberg.
In August, the city-state’s government announced a task force aimed at revitalizing the S$811 billion ($632 billion) market, which has lost its position as Southeast Asia’s largest due to a wave of delistings outpacing new listings. However, within Singapore Exchange Ltd. (SGX), staff in the equity capital markets division reportedly feel a sense of defeatism, believing that performance targets such as doubling the number of new listings are unrealistic and unattainable.
Sources familiar with the matter reveal that SGX management has considered pivoting away from cash equities to focus on derivatives, futures, and options, potentially positioning itself as Asia’s version of CME Group. There have even been internal discussions about taking SGX private to reduce public scrutiny.
Despite Singapore’s success in attracting global investors, wealthy families, and multinational companies, little of this capital has found its way into the city-state’s equity market. The bourse is grappling with poor trading liquidity and low valuations, with only one initial public offering in 2024 so far.
Action plan
The government has set a deadline of next summer for an action plan, with the upcoming general elections adding urgency to the task. This revival effort follows years of disagreement between SGX officials and the Monetary Authority of Singapore on how to address the equity market’s problems.
Market participants express frustration with the long-standing stagnation. Gerard Lee, a retired fund management industry veteran, starkly stated, “The market has become irrelevant.” This sentiment is echoed by international investors like Mark Mobius, whose firm has zero exposure to Singapore stocks due to the market’s concentration in less attractive sectors.
Various factors have been blamed for the market’s decline, including regulatory conservatism, lack of government support, and competition from other regional exchanges. The task force is exploring solutions such as channeling more capital from family offices into local stocks, encouraging fund houses to launch Singapore-specific products, and increasing retail investor participation.
However, significant challenges remain. The stock market’s weakness threatens to impact private fundraising opportunities for local companies, as investors lack easy exit options. Calls for allocating public pension funds to local equities have been met with resistance, as the government maintains its focus on global investments through sovereign wealth fund GIC.
As the task force continues its work, industry experts like James Leong of Grasshopper Pte. emphasize the need to woo back retail investors to restore the market ecosystem. While some improvements may result from this concerted effort, skepticism persists about the possibility of achieving a truly flourishing market in the near future.