Singapore’s stock market volume saw an “uptick” in recent months, driven by market sentiment and investment flows. While this is “a welcome development” and a reminder of the “potential of our market”, Singapore Exchange (SGX) Group chairman Koh Boon Hwee cautions that equity markets are “inherently cyclical”.
Speaking at SGX Group’s 25th anniversary ceremony on Jan 2, also the first trading day of the year, Koh says sustained growth in the stock market cannot rely solely on sentiment or temporary investment flows.
“For the Singapore stock market to be truly sustainable, a myriad of structural and policy issues must be addressed, certainly by SGX, but also with policymakers, regulators and all players within the ecosystem,” says Koh, who was appointed chairman at the start of 2023.
Citing examples from other markets, Koh says the success of the stock market is “very much linked” to economic success and the policies that support the latter. “Bold and decisive actions by policymakers and key participants in the ecosystem are essential.”
Singapore must do the same, Koh adds, referencing an ongoing equities market review to explore ways to improve liquidity in the local bourse.
“Whether it is reforming policies to attract liquidity, or a paradigm shift in how we approach regulation, it will take courage, a willingness to take risks and a collective commitment to change,” he says. “The ecosystem is heartened that the equities market review group is delving into the longstanding issues in the stock market.”
See also: ‘Not practical’ to rely on sovereign wealth to support, sustain S’pore equities: Gan Kim Yong
While Koh notes that SGX Group’s derivatives business “has seen tremendous success”, he says the stock market has been “particularly challenging”.
“A vibrant equities market is a major pillar of every financial centre, fuelling entrepreneurship, encouraging start-ups and venture capital, and overall economic growth,” he adds. “To remain competitive and relevant in a global and digital economy, especially here in Southeast Asia, we need to address these issues head on.”
Koh’s speech echoes his letter to shareholders from the bourse operator’s latest annual report, released Sept 16, 2024, where he said it is “evident” that SGX Group’s cash equities business “needs more work”.
In his letter, issued a month after the Monetary Authority of Singapore launched the equities market review group, Koh wrote: “Some may argue that the stock market is only one aspect of our financial ecosystem, but it is more like a pillar. And we should recognise that if this one pillar were to falter, the whole is put at risk.”
Seed capital
Following Koh’s opening address, Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong delivered opening remarks ahead of the market open.
Gan says the equities market review group is studying how to make “optimum use” of seed capital to draw in more commercial capital.
It is “not practical” to rely on sovereign funds alone to sustain and support Singapore’s equity market, says Gan. 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
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”.
Gan says SGX’s regulatory framework should be reviewed to remove “unnecessary friction” from the listing process, while strengthening investor confidence.
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According to Gan, 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.”
Read more about the equities market review group:
- ‘Not practical’ to rely on sovereign wealth to support, sustain S’pore equities: Gan Kim Yong
- 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
