SINGAPORE: Once regarded as a gateway to Asia, the Singapore market is in distress of sorts as an increasing number of listed companies head for the door.
To date this year, eight companies have announced plans for delistings. With several more indicating buyout offers on the table, this could rise to a dozen within the next couple of months.
Meanwhile there has only been one new initial public offering (IPO) on the local bourse, that of motoring group Vin Holdings. Another, candy maker YLF Group, has just called off plans to list here.
This follows a dismal 2024, where the Singapore Exchange (SGX) saw only four IPOs but 20 delistings.
Not exactly the kind of news the Monetary Authority of Singapore’s (MAS) Equities Market Review Group (EMRG) would welcome.
Set up last year to devise measures which would inject life into SGX, the EMRG has already announced several measures, including a S$5 billion Equity Market Development Programme - an initiative designed to encourage more investment in Singapore-listed equities. Corporate tax incentives and rebates, streamlined listing processes and simplified prospectus disclosure requirements are part of the plan.
While these steps are positive on paper at least, the events of the past five months suggest that investors are not exactly tripping over themselves to list on the local bourse.
Volumes remain modest at best and prices are largely subdued (which some might say is a positive in a volatile and unpredictable world).
But there is no denying that the Singapore equity market faces some serious underlying problems which prevent it from playing to its full potential.
Chief amongst these is low valuations.
About two-thirds of the over 600 listed companies on SGX are trading below their net tangible values. This undervaluation is particularly pronounced amongst small and mid-cap stocks, despite many of these companies being profitable and paying attractive dividends.
As a result, their stocks are priced at a significant discount to valuations that they might otherwise fetch in private deals or even on other exchanges. This has prompted not only privatisations by controlling shareholders, but has also attracted offers by third parties, as were the cases for Ban Leong Technologies and Amara Holdings.
The root cause of this undervaluation is low liquidity.
Trading volumes on the SGX are not only significantly lower than those of larger markets like Hong Kong and the US, but generally also lag regional bourses such as Kuala Lumpur, Bangkok and Jakarta.
While there are many reasons why this is so, one reality is that the Singapore market is dominated by sectors like property, conglomerates and banking stocks. Tech stocks barely feature here. This is unlike Wall Street, where tech stocks, led by the so-called Magnificent Seven, dominate. Even in Hong Kong, new economy plays like Tencent, Alibaba, Xiaomi and JD.com attract strong investor interest which often then filters through the entire market.
Without a sufficiently large ecosystem of new economy growth plays, the Singapore market will continue to struggle to attract the next generation of inventors.
Speaking to market insiders, one also comes away with the impression that the SGX’s regulatory regime, while acknowledged to be amongst the best in the world, is somewhat burdensome for smaller companies. Companies with thin or volatile margins will find it difficult to cope with the high compliance costs, and may ultimately head for the door. More so if their stocks attract scant interest in the market.
So what is the solution?
While the EMRG’s initiatives appear to be a step in the right direction, some industry observers argue that more could be done to support an illiquid bourse. While S$5 billion is a good start for injecting liquidity into the market, it is worth considering if government-backed funds like GIC should also invest in SGX-listed stocks.
As I have said before in my prior columns on this subject, if the SGX succeeds in attracting regional companies to list here, it makes sense for the GIC to invest in them, particularly when it does so on other exchanges like Hong Kong. Such an approach could further increase the appeal of the SGX as a listing destination.
There have also been some suggestions that restrictions on short selling and margin trading be eased to support liquidity. Properly regulated and confined to “accredited investors” who have undergone some form of training or attended a requisite course, this could bring back the animal spirits necessary to fire up liquidity in the market. The Securities Investors Association (Singapore), or SIAS, could undertake such a programme and certification.
There are many ways to skin the cat but there is no single solution to the problem.
The issues of liquidity, delistings and the lack of new IPOs is a serious concern for a market situated at the heart of one of Asia’s premier financial and wealth management centres. But this is not an insurmountable problem. It just requires serious workable solutions which address core issues.
Half-hearted and piecemeal measures may not be enough. The criticism now is that the EMRG’s initiatives are too few, too late and not comprehensive enough to provide a big bang solution for a very sickly market. More boldness is required.
Ven Sreenivasan is a former editor and journalist who has covered financial markets, economic and corporate news and aviation for over more than 30 years.
Continue reading...
To date this year, eight companies have announced plans for delistings. With several more indicating buyout offers on the table, this could rise to a dozen within the next couple of months.
Meanwhile there has only been one new initial public offering (IPO) on the local bourse, that of motoring group Vin Holdings. Another, candy maker YLF Group, has just called off plans to list here.
This follows a dismal 2024, where the Singapore Exchange (SGX) saw only four IPOs but 20 delistings.
Not exactly the kind of news the Monetary Authority of Singapore’s (MAS) Equities Market Review Group (EMRG) would welcome.
Set up last year to devise measures which would inject life into SGX, the EMRG has already announced several measures, including a S$5 billion Equity Market Development Programme - an initiative designed to encourage more investment in Singapore-listed equities. Corporate tax incentives and rebates, streamlined listing processes and simplified prospectus disclosure requirements are part of the plan.
While these steps are positive on paper at least, the events of the past five months suggest that investors are not exactly tripping over themselves to list on the local bourse.
Volumes remain modest at best and prices are largely subdued (which some might say is a positive in a volatile and unpredictable world).
But there is no denying that the Singapore equity market faces some serious underlying problems which prevent it from playing to its full potential.
LOW LIQUIDITY
Chief amongst these is low valuations.
About two-thirds of the over 600 listed companies on SGX are trading below their net tangible values. This undervaluation is particularly pronounced amongst small and mid-cap stocks, despite many of these companies being profitable and paying attractive dividends.
As a result, their stocks are priced at a significant discount to valuations that they might otherwise fetch in private deals or even on other exchanges. This has prompted not only privatisations by controlling shareholders, but has also attracted offers by third parties, as were the cases for Ban Leong Technologies and Amara Holdings.
The root cause of this undervaluation is low liquidity.
Trading volumes on the SGX are not only significantly lower than those of larger markets like Hong Kong and the US, but generally also lag regional bourses such as Kuala Lumpur, Bangkok and Jakarta.
While there are many reasons why this is so, one reality is that the Singapore market is dominated by sectors like property, conglomerates and banking stocks. Tech stocks barely feature here. This is unlike Wall Street, where tech stocks, led by the so-called Magnificent Seven, dominate. Even in Hong Kong, new economy plays like Tencent, Alibaba, Xiaomi and JD.com attract strong investor interest which often then filters through the entire market.
Without a sufficiently large ecosystem of new economy growth plays, the Singapore market will continue to struggle to attract the next generation of inventors.
Related:
MORE BOLDNESS REQUIRED
Speaking to market insiders, one also comes away with the impression that the SGX’s regulatory regime, while acknowledged to be amongst the best in the world, is somewhat burdensome for smaller companies. Companies with thin or volatile margins will find it difficult to cope with the high compliance costs, and may ultimately head for the door. More so if their stocks attract scant interest in the market.
So what is the solution?
While the EMRG’s initiatives appear to be a step in the right direction, some industry observers argue that more could be done to support an illiquid bourse. While S$5 billion is a good start for injecting liquidity into the market, it is worth considering if government-backed funds like GIC should also invest in SGX-listed stocks.
As I have said before in my prior columns on this subject, if the SGX succeeds in attracting regional companies to list here, it makes sense for the GIC to invest in them, particularly when it does so on other exchanges like Hong Kong. Such an approach could further increase the appeal of the SGX as a listing destination.
There have also been some suggestions that restrictions on short selling and margin trading be eased to support liquidity. Properly regulated and confined to “accredited investors” who have undergone some form of training or attended a requisite course, this could bring back the animal spirits necessary to fire up liquidity in the market. The Securities Investors Association (Singapore), or SIAS, could undertake such a programme and certification.
There are many ways to skin the cat but there is no single solution to the problem.
The issues of liquidity, delistings and the lack of new IPOs is a serious concern for a market situated at the heart of one of Asia’s premier financial and wealth management centres. But this is not an insurmountable problem. It just requires serious workable solutions which address core issues.
Half-hearted and piecemeal measures may not be enough. The criticism now is that the EMRG’s initiatives are too few, too late and not comprehensive enough to provide a big bang solution for a very sickly market. More boldness is required.
Ven Sreenivasan is a former editor and journalist who has covered financial markets, economic and corporate news and aviation for over more than 30 years.
Continue reading...