Many Asian companies that have gone on to list in the US, where the equities market is the largest and most liquid in the world by far, often find themselves out of the spotlight very quickly.
Neil Parekh hopes such companies will make their way back to this region — including SGX, where there is already a sound secondary listing — and stop being “orphans” if they are to remain only in the large exchanges.
“When you ring the bell on the New York Stock Exchange, or wherever you are, there's a lot of focus. But as many of the companies have seen, in a short period of time, liquidity dries up, valuation goes down, and you see negative media articles saying, ‘Hey guys, you know what, this is happening’,” says Equities Market Review Group member Parekh.
While they will be a bigger fish in a smaller pond here, such companies will have the brand recognition, but not necessarily so to the US-based investment community.
“We love Milo, I love Milo, but you take a Milo company to the US, no one even knows about it. The reality is, there are many businesses that belong listed in Asia,” says Parekh, speaking in his capacity as the deputy chairman of the Global Financial and Technology Network.
Parekh notes that some secondary listings raise new capital but others do not — although they might do so down the road. He points out that the $5 billion equity market development programme (EQDP) will open up a new pool of Singdollar funding to be invested in secondary listings here. “It is the ability to target a whole new set of investors,” he reasons.
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Parekh believes that thus far secondary listings on SGX have not taken off because companies and investors do not see “light at the end of the tunnel today, which is the ability to raise money from Singdollars”.
If the $5 billion works and leads to a larger ecosystem, those Asian companies now listed in the US might want to come back. “They’d love to do a secondary because they have name recognition. Right now, they are like, what's the benefit?”
On the other hand, secondary listings of regional companies not originally based here will give the investor base in Singapore access to these companies without incurring forex risks. It helps the Singdollar investment space as a whole because there are many funds in Singapore — both retail and institutional — that can only invest in Singdollars, he says.
See also: STI gives up day’s gains to close 0.06% lower on Feb 24
“So it's a win-win. If you get it right, there are benefits on both sides. That's the only way markets work, right? You can't if it's a one-way ticket, then there is no market,” says Prakeh.
The headline measure from the review group’s Feb 21 announcement is the $5 billion fund that the Monetary Authority of Singapore will allocate to fund managers to invest in local stocks.
In the context of Singapore’s entire market cap of more than US$600 billion, this $5 billion is but a mere fraction. Is this pool of money sufficient to make a difference, especially to the fund managers who are all too used to managing billions of dollars.
“The asset management business is always looking for new assets, okay? That's the nature of the business. You want to grow, and every dollar of AUM gets additional fees. You're always looking for new assets where you can differentiate your strategy,” says Parekh, who wears another hat as chairman, Asia at investment firm Tikehau Capital.
“The idea is not end with $5 billion. The $5 billion should be crowd-in capital, you bring in additional capital whether it is a new fund that they set up for this or it is an existing fund. Additional assets that can lead to more assets is the prerogative of any asset manager,” he adds.
The first set of measures teased by the review group on Feb 13 include proposed tax incentives to attract enterprises and fund managers to list in Singapore. Parekh says a goal of the review group is to entice asset managers, instead of just investing in local equities, be themselves Singapore-listed entities too.
With a listing status as well, the asset managers, presumably will benefit from a more vibrant ecosystem directly too. “We should target them, not just corporate listings, because listings are listing; liquidity is liquidity,” says Parekh.
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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)
- '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)
