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, says Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong on Jan 2.
Speaking at the start of the Singapore Exchange ’s (SGX) first trading day of the year, Gan says 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 adds.
“We must also strengthen the larger ecosystem to build a stronger pipeline of quality listings, catalyse investor interest and sustain liquidity,” says Gan. “For example, we can explore enhancing research coverage into the types of pre-IPO growth companies we want to attract, be it small- and mid-caps or specific sectors that we want to grow.”
Gan says it is “inevitable” that a “sizeable proportion of liquidity” will be concentrated in a number of well-known counters. However, the review group and SGX must aim to broaden liquidity beyond these counters, he adds. “This will be especially critical for smaller counters, for example those with market cap between $500 million and $3 billion.”
Attracting companies
See also: MAS’s equities market review group holds first meeting, unveils 31 workstream members
On the supply side, Gan says the review group and SGX must “better define” the profile of companies Singapore wants to attract for public listing.
Gan notes that Minister for Transport and Second Minister for Finance Chee Hong Tat, who chairs the review group, previously shared that they are looking at companies already based in Singapore, as well as companies from emerging markets and engaged in fintech, innovation and sustainability.
In addition, Gan says the review group is studying how to “better position” Singapore’s equities market to attract “high-quality mid-cap growth companies” that are “likely to be less visible on larger exchanges in the US, China and Japan”. These companies, however, can benefit from being listed on SGX due to brand familiarity with investors in the region, Gan adds.
See also: Revitalising Singapore equities market ‘not an easy task’, says Chee Hong Tat
“By being clear with the profile of companies we want to attract, we can better design our incentives for these companies to consider Singapore as a listing venue, as well as for fund managers to launch products that invest in the local equities market,” he says.
‘Overly protective of investors’
Finally, Gan says SGX’s regulatory framework should be reviewed to remove “unnecessary friction” from the listing process, while strengthening investor confidence.
Gan says some market observers have called the current regulatory regime “cumbersome and restrictive in certain aspects for issuers”, and “overly protective of investors”. “On the other hand, other commentators have highlighted how investors have suffered losses in some past episodes of market misconduct. These voices emphasise the importance of strengthening investor confidence in our market.”
The review group and SGX should “streamline and review” bourse regulations, says Gan. “This should not only reduce friction and compliance burden, but uplift investor confidence such as through strengthening avenues for investor recourse.”
The review group is “consulting widely”, says Gan, and will share further updates “in due course”.
Read more about the equities market review group:
- SGX Group chairman calls for ‘bold and decisive actions’ to solve stock market’s ‘longstanding issues’
- Making the Singapore market great again
- Revitalising Singapore equities market ‘not an easy task’, says Chee Hong Tat
- MAS’s equities market review group holds first meeting, unveils 31 workstream members
- MAS launches review group to strengthen equities market; recommendations to come within a year