Shares in Singapore Exchange (SGX) closed 78 cents lower, or 5.8% down, at $12.69 on Feb 14, a day after the Monetary Authority of Singapore (MAS) announced the first tranche of proposals by its equities market review group.
On Feb 13, MAS said the group had already submitted the proposals to Singapore’s Prime Minister and Finance Minister Lawrence Wong.
One of the measures proposed is to introduce tax incentives to attract enterprises and fund managers to list in Singapore. The measures also seek to incentivise the launch and growth of funds that have substantial investments in domestic equities.
Whil the review group will provide more updates on Feb 21, the announcement has apparently fallen short of the market’s expectations. Some had hoped for bolder proposals, such as expanding GIC’s mandate to also include investments into Singapore.
Earlier today, Citi Research analyst Tan Yong Hong downgraded SGX to “sell” as he expects recent optimism over the potential impact of the equities market review group to unwind.
Tan writes in his Feb 14 note: “We earlier flagged that SGX’s 12-month forward price-to-earnings (P/E) multiple of 23.4 times reflects an optimistic outcome from the MAS review group, but commentaries not recommending GIC or Central Provident Fund involvement in domestic equities likely disappointed markets.”
See also: Citi downgrades SGX to ‘sell’ after MAS equities market review group’s first proposal
Along with the downgrade, Tan also lowered his target price to $11.90, down from $13.10, which he had set on Nov 4, 2024.
The revised target price implies 21 times P/E — “roughly at mean level” — but this is ahead of the 19 times P/E trough in May 2024, when Tan upgraded SGX to “buy”.
Earlier this year, Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong said it is “not practical” to rely on sovereign funds alone to sustain and support Singapore’s equity market. Instead, any use of public funding has to catalyse commercial capital, in order to sustain trading interest in the local equities market over the long term.
See also: ‘Not practical’ to rely on sovereign wealth to support, sustain Singapore equities: Gan Kim Yong
Speaking on Jan 2 at the start of SGX’s first trading day of the year, Gan said the equities market review group, which was established in August 2024 to explore ways to improve liquidity in the local bourse, is studying how to make “optimum use” of seed capital to draw in more commercial capital.
This will ensure that the government’s “developmental capital” is deployed on a “fiscally prudent basis”, he added.
