The Singapore Exchange (SGX) will launch a new index that tracks companies beyond the 30 constituents that make up the benchmark Straits Times Index (STI), says Chee Hong Tat, minister for national development and deputy chairman of the Monetary Authority of Singapore (MAS). Chee was speaking at the Singapore Institute of Directors’ (SID) directors conference on Sept 12.
The move is one of the initiatives to drive interest in companies listed on the Singapore bourse.
“The STI represents only a portion of our listed companies, and investor interest in the next tier is growing — partly driven by the EQDP (equity market development programme),” says Chee. “This new index will provide a useful lens to track how the next tier of large and liquid companies are evolving — whether through business model transformation, improved governance or stronger capital management initiatives.”
Over time, Chee adds that he hopes to see more indices covering areas such as corporate governance and sustainability. This creates a virtuous circle and will generate “positive momentum for the entire market”.
Delivering greater shareholder value via visibility and clarity
In his speech, Chee also noted that investors are looking beyond headline earnings and, as such, Singapore companies can and must do more to deliver greater shareholder value.
Today’s investors are “far more sophisticated”, and as such, strong revenue growth and healthy earnings, while necessary, are “often insufficient” in today’s landscape.
“[Investors] want to understand your growth story, not just your current performance,” he says. “They want visibility on capital allocation, clarity on long-term strategy and confidence that management is committed to creating value.”
He adds that to capture investors’ attention, companies must now articulate their growth story. Going beyond standard financial reporting, companies must also present a “compelling narrative” of how today’s actions will translate into tomorrow’s success.
See also: Sustaining the momentum: Value-up as the next chapter for Singapore’s equity market
CEOs must be the face of the company
Among the initiatives to help companies unlock value, the review group believes C-suite executives and board directors will have to be proficient in “corporate strategy, capital optimisation, investor engagement and media outreach” beyond financial management.
“Corporate leaders need to focus on strategic priorities beyond day-to-day business operations — they must actively develop long-term plans and think about value creation with the shareholders in mind,” says Chee.
He adds that this often requires a mindset shift including for founder CEOs because “leading a public listed company is different from helming a private company”.
With this in mind, CEOs must be the face of the company, Chee continues, citing examples such as Microsoft’s Bill Gates, Nvidia’s Jensen Huang, DBS’s former CEO Piyush Gupta and his successor, Tan Su Shan.
But this cannot rest on the CEO alone. The entire leadership team must also be equipped. For instance, chief financial officers (CFOs) also play a critical role. They should go beyond producing accurate financial statements, to weaving these numbers into a “persuasive narrative”.
Communications key
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In a world where investors have a lot of choices, actions, while louder than words, aren’t enough. Companies must now be able to show and share their vision.
“This is an important part of building trust and earning the confidence of our stakeholders and partners,” says Chee.
He adds that listed companies need to put themselves forward with finetuning and communicating strategic plans, holding regular investor engagements and making their growth story accessible.
Like companies in overseas markets, local listcos should also share their views on their firms’ outlook and prospects.
On concerns about potential legal exposure when companies provide such information, Chee says the MAS will review how to “provide greater clarity” on its regulatory framework to “facilitate open communication while upholding market integrity”.
SGX says sustainable growth 'dependent' on listcos 'unlocking shareholder value (update)
In a statement sent to the media, SGX Group's head of equities, Ng Yao Loong, said that SGX is "committed to doing its part by equipping listed companies with the necessary tools and resources to enhance shareholder value, and enabling investors to make confident and more informed decisions".
Noting that sustainable growth in the local bourse is "in [a] large part" dependent on Singapore's listcos unlocking value, Ng also notes that the transformation requires a "collective effort across the ecosystem".
"Our initiatives are mutually reinforcing: stronger corporate value enhancing practices generate greater visibility, while recognition through index inclusion motivates better performance. Together with transparent disclosure, these efforts will make listed companies – especially those beyond the STI – more visible to institutional and retail investors alike," says Ng.
On Chee's point about communication, Tan Boon Gin, CEO of Singapore Exchange Regulation (SGX RegCo), says companies must "engage with investors better" in a bid to "complement corporate actions and financial management that unlock or increase shareholder value".
"More institutional capital is entering the market. Companies that want to be noticed and rewarded for having quality management and business strategies must proactively communicate their outlook and strategies to provide forward-looking guidance," he adds. "This allows investors to take such decision-useful information into consideration and ascribe the right valuations to these companies. We intend to consult the market on whether companies should be required to disclose policies such as dividend and investor relations. This is how we collectively raise the bar in line with global best practices.”
Chew Sutat, Protem chairman of SGListCos and former SGX executive, says SGX's push for meaningful investor communications is "timely" as interest in small- and mid-cap stocks is accelerating.
"While some listed companies are already making strides in enhancing shareholder value and articulating their strategies, it is imperative for all listed companies to step up to tap on this momentum," he adds.
SGX says it will announce more details pertaining to the index on Sept 22.
