As part of the slew of first set of market revival measures, there will be further support to expand research coverage of smaller cap counters.
The equities market review group will allow research grants to be expanded to include research coverage of pre-IPO companies and not just those already listed here.
“Expanding research coverage to pre-IPO companies helps raise awareness of pre-IPO companies, which better supports investor demand and valuations when such companies eventually IPO in Singapore,” says the review group.
Terence Wong, CEO of Azure Capital, would find such moves familiar. Before starting his own fund management business, he was an analyst focused on local small- and mid-caps. He was also heading up the then research unit of the Securities Investors Association (Singapore).
Wong recalls that support for research has gone through various iterations, resulting in varying levels of impact.
Anecdotally, some of the brokerages that joined the scheme would hire relatively junior analysts specifically for this scheme. But once the funding round was over, they would suspend coverage.
See also: MAS Review Group’s proposals may boost short-term returns, but will it be sustainable?
To be sure, there were instances where analysts soldiered on with their focus on small-caps but more often than not, coverage fizzled off, especially as more retail investors chose to punt on US or Hong Kong stocks instead.
Wong believes that as markets become buoyant, interest in smaller caps will take a life on its own and the brokerages will find it justifiable to continue with such coverage instead. Ultimately, such schemes are but stop-gap measures.
“Once the money comes in and they find it viable, these guys will find a good home in these brokerages for the long term,” he says.
See also: STI gives up day’s gains to close 0.06% lower on Feb 24
However, what interests Wong more would be the $5 billion Equity Market Development Programme (EQDP) that the government will allocate to fund managers to invest in Singapore equities outside of the 30-member Straits Times Index.
In short, the funding is to be invested in the smaller caps — right up Wong’s alley. Wong says he is definitely keen to win a mandate to manage part of this $5 billion pool.
As the review group was formed, several market commentators were suggesting GIC, and to lesser extent, Temasek, to be the source of big catalyst funding.
Prior to the announcement of the EQDP, the government had at various platforms rejected suggestions to use GIC money, to the disappointment of market observers — especially so when the initial measures announced on Feb 13 were limited to tax incentives.
Wong is pleasantly surprised that the funding is coming from the Monetary Authority of Singapore (MAS) instead, which, together with GIC and Temasek, are the three key institutions safeguarding and managing the country’s wealth.
“It is the signalling that there are funds associated with the government that's out there, looking for such companies. And this will actually have a ripple impact, as the other investors will look as well.”
Along with the slew of other measures announced on Feb 21, Wong felt a sense of relief. “This has definitely made my Friday,” he says.
Read more about the equities market review group:
- Proposing equity market changes a ‘balancing act’ that comes with ‘trade-offs’: Chee Hong Tat (Feb 22)
- Plenty of overseas liquidity to be tapped amid plan to nudge family office money into local equities: Lang (Feb 21)
- MAS and Financial Sector Development Fund to launch $5 bil programme, adjust GIP to revive Singapore’s equities market (Feb 21)
- ‘Unaddressed elephant in the room’: Reservations about MAS equities market review group’s proposals (Feb 17)
- SGX shares close 5.8% lower after MAS equities market review group’s first proposal (Feb 14)
- MAS’s equities market review group proposes tax incentives as part of measures to boost Singapore’s bourse (Feb 13)
- Revitalising SGX: Beyond liquidity injections (Feb 6)
- ‘Not practical’ to rely on sovereign wealth to support, sustain Singapore equities: Gan Kim Yong (Jan 2)
- SGX Group chairman calls for ‘bold and decisive actions’ to solve stock market’s ‘longstanding issues’ (Jan 2)
- Making the Singapore market great again (October 2024)
- Revitalising Singapore equities market ‘not an easy task’, says Chee Hong Tat (September 2024)
- MAS’s equities market review group holds first meeting, unveils 31 workstream members (August 2024)
- MAS launches review group to strengthen equities market; recommendations to come within a year (August 2024)
