A Julius Baer analyst is positive about the first set of measures proposed by the Monetary Authority of Singapore’s (MAS) equities market review group to stimulate the local bourse, “given the success of similar reforms in Japan and [South] Korea”.
Jen-Ai Chua, Asia equity research analyst at Julius Baer, says she expects “mid-caps and high-yielding” stocks, as well as “quality companies with improving shareholder returns”, to benefit from the proposed measures, which were unveiled on Feb 21.
The first set of measures to revitalise the Singapore stock exchange includes a $5 billion equity market development programme (EQDP) to invest in Singapore equities and adjustments to the Global Investor Programme (GIP) such that new GIP family office applicants with assets under management (AUM) of at least $200 million must have at least $50 million deployed in Singapore equities.
Other measures proposed include tax incentives for market participants and new listings; and a more “pro-enterprise” regulatory approach. MAS and Singapore Exchange Regulation (SGX RegCo) say they will issue “detailed” consultations on the latter by mid-2025.
“Among these measures, the $5 billion EQDP is expected to have the greatest near-term impact, as it is likely to materially improve liquidity when deployed,” says Chua in a Feb 24 note. “$5 billion is equivalent to 0.6% of the total market capitalisation listed on the Singapore stock exchange and is four times the daily cash market traded value.”
Hence, Chua thinks it is “material” relative to the $20 billion of Singapore-focused funds.
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“While there are no details on the timing of the EQDP, the size of the initiative should be positive for liquidity in the Singapore equities space, with mid-cap and high dividend yield stocks seeing more interest,” she adds.
In addition, the adjustment to the GIP “could also be meaningful over time” as the number of single-family offices (SFOs) in Singapore has increased from 400 in 2020 to over 2,000 by end-2024.
That said, not all of them may fall under the GIP, notes Chua.
See also: South Korea's Yoon can kiss his stock market reform goodbye
Japan, Korea comparisons
Chua’s reference to similar stock market reforms in Japan and South Korea are not new; CGS International analyst William Tng and his team mentioned these initiatives as early as May 2024, three months before the review group was set up.
Japan and South Korea started efforts to improve the valuation of their listed issuers in 2022 and 2024, respectively. Equity reforms in South Korea, however, were scuppered when president Yoon Suk Yeol declared martial law in a shock move in December 2024. The Korea Composite Stock Price Index or KOSPI has only recently recovered to levels last seen in October 2024.
Over in Japan, the Tokyo Stock Exchange (TSE) said it aims to create a market where it is the norm for listed companies to work on improving corporate value through management that is conscious of cost of capital and stock price. TSE also said it expects more listed issuers to privatise and delist as the cost of remaining listed increases.
According to TSE disclosures, 50% of the stocks listed on its Prime Market traded below book value as of Sept 30, 2022. After the start of its “Value Up” programme in 2023, this ratio improved to 36% as of April 2024.
“Early outperformers in Japanese and Korean equity market reforms were liquid and quality companies that led peers in shareholder value,” says Julius Baer’s Chua. “We expect companies in Singapore with a similar profile to also benefit.”
Aside from the review group’s first tranche of proposed measures, Chua notes that more programmes to improve shareholder value are expected by end-2025.
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These include a review of the Catalist board and ways to enhance avenues for investors to seek recourse and compensation for losses suffered due to market misconduct.
Speaking at a Feb 21 media briefing, Second Finance Minister and chair of the review group Chee Hong Tat says the 10-member group aims to “complete this second tranche of measures by [the] end of this year”.
In response to queries by The Edge Singapore, Chee says the review group “need[s] a bit more time to work out” measures in the second tranche. “We are still in discussion with stakeholders to better understand the concerns and how to strike this balance between keeping the spirit of innovation and enterprise, and allowing different groups of investors with different risk appetites to decide for themselves how they want to invest, versus putting in place sufficient protection for investors, especially retail investors.”
Read more about the equities market review group:
- Review group's measures can help 'break the inertia' of IPOs vs liquidity, says Clifford Lee of DBS (Feb 23)
- Equities market review group targeting ‘mid-sized but good-sized’ companies to list in Singapore (Feb 23)
- New family offices may contribute $15 billion to local bourse this year, suggests Maybank's Wickramasinghe (Feb 23)
- Proposing equity market changes a ‘balancing act’ that comes with ‘trade-offs’: Chee Hong Tat (Feb 22)
- 'This has definitely made my Friday': Azure's Wong (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)
