The Singapore Exchange (SGX) faces a deepening problem as the number of listed companies plunged 20% in just five years, from 782 to 622 by January 2025.
In 2024, SGX’s IPO proceeds of US$31.4 million ($42.4 million) from four IPOs represented just 2% of Bursa Malaysia’s US$1.5 billion from 55 IPOs and 3.5% of Indonesia’s US$900 million from 41 IPOs. The stark disparity in regional performance signals deeper structural issues beyond mere market cycles.
SGX’s recent performance in 2024 continues a worrying trend of consistently higher delistings than new IPOs for the past several years. In contrast, regional competitor stock exchanges, notably Bursa Malaysia, have seen their performance improve significantly over the same period.
This stark contrast highlights the urgent need for reform in Singapore’s equity market.
Declining market quality
SGX’s deterioration is evident in both quantity and quality. Of the 622 listed securities on the SGX, only 573 remain tradeable with 8% suspended — comprising 385 Mainboard securities and 188 Catalist listings, as of January 2025. The performance disparity is stark: 70% of Mainboard-listed companies are profitable versus only 43% of Catalist companies.
More alarming is the proliferation of zombie companies, particularly on the Catalist board. A staggering 86% of Catalist stocks trade below their day one closing price, with 40% having lost nearly all their initial value. Of Catalist companies listed for over a decade, 66% remain loss-making, raising serious questions about the board’s effectiveness as a growth platform.
Chee Hong Tat, Second Minister for Finance, has acknowledged the gravity of the situation, stating: “Everyone can see there is a need for us to do something to improve the situation that we face today in Singapore.”
The Catalist challenge
The Catalist board, launched in 2007 as a springboard for fast-growing SMEs, has transformed from a growth platform into a repository for underperforming stocks.
Of the nine Catalist companies that advanced to Mainboard in a decade, two have since faltered — Halcyon Agri has been suspended and Keong Hong Holdings has been placed on the watchlist. Meanwhile, 17 Mainboard companies were demoted to the Catalist board over the same period, highlighting the board’s transformation from a growth platform to a safety net for struggling companies.
See also: How 'shareholder value' became a Wall Street mantra
The median revenues of Catalist companies is just S$27.4 million, compared to S$224 million for Mainboard listings. More concerning, 30% of Catalist companies report revenues below S$10 million, with three reporting zero revenue.
Conflicted Catalist model
The sponsor-supervised model adopted by Catalist has proven inadequate, with inherent conflict of interest where supervisors are compensated by supervisees.
Just as the regular clearing of underbrush and dead trees promotes the growth of new and healthier plants, there needs to be some form of quality control and independent supervision for a healthy stock exchange.
Allowing loss-making companies (57% of Catalist stocks are unprofitable) with minimal revenues to continue to remain listed indefinitely so long as they continue to pay sponsor fees only creates zombie companies and an unhealthy stock exchange.
SGX: Balancing profit and oversight
While SGX Group reports strong financial performance — $1.23 billion revenue and $598 million net profits in FY2024 with consistent 50% operating margins — its dual role creates fundamental conflicts.
Despite RegCo’s separate board, its status as a wholly-owned SGX subsidiary compromises true independence, mirroring SMRT’s past challenges in balancing commercial and public service obligations.
The UK model, where regulatory functions are completely separated from exchange operations, offers an alternative framework worth considering. Singapore’s successful separation of Maritime and Port Authority of Singapore (MPA) and PSA’s regulatory and operational functions provides a local precedent for reform.
Sink your teeth into in-depth insights from our contributors, and dive into financial and economic trends
While RegCo provides some separation of functions, its effectiveness in ensuring true independence remains questionable. RegCo’s market-friendly initiatives, such as reduced quarterly reporting requirements and dual-class shares, appear commercially driven rather than regulatory-focused.
It would be timely for the Monetary Authority of Singapore (MAS) task force to consider whether the current structure where SGX, with its dual role of commercial and regulatory functions, delivers the best outcome for Singapore.
Disclosure-based regime: Overly onerous or too lax?
Singapore’s disclosure-based “comply or explain” regime assumes informed investors can protect themselves, with directors bearing primary responsibility for disclosure quality. While this provides flexibility and avoids one-size-fits-all regulation, implementation has proven problematic.
The “comply or explain” regime faces contradictory criticisms: Firstly, listed companies find requirements rigid and burdensome when choosing to “comply”. On the other hand, market participants view enforcement as insufficient when companies opt to “explain” with superficial boilerplate explanations for non-compliance.
This paradox stems from weak enforcement mechanisms, limited institutional investor engagement, and insufficient accountability for misleading disclosures.
Effective disclosure-based regulation requires sophisticated market participants and strong institutional support — elements currently underdeveloped in Singapore’s market. Success also depends on mutual trust between stakeholders and companies, who need to adopt good governance practices emphasising substance over form.
In the meantime, with the perception of poor regulatory enforcement and few options for minority shareholder recourse, many local investors have chosen to stay away from investing in Singapore listed-companies.
Trading costs: A competitive disadvantage
Singapore’s trading costs create a significant competitive disadvantage. The main components of trading costs in Singapore are broker commission, clearing, trading, settlement fees and GST. Depending on the broker, a platform fee may also be applicable.
A $10,000 trade in Singapore incurs $35 through traditional brokers or $11–18 via low-cost platforms, compared to just US$0.45–8.45 ($0.62–11.50) for equivalent US trades.
This cost disparity, combined with lower returns, continues to drive investors toward overseas markets.
The liquidity myth: Addressing symptoms instead of root causes
Injecting taxpayer funds into the market without first addressing the underlying fundamental issues is like pouring water into a leaking pail. Regardless of however much water you pour in, the water will eventually run out. Instead, the focus should be on: Improving quality of listed companies through enhanced listing requirements and board governance standards; separation of commercial and regulatory functions, balancing market growth and investor protection and competitive trading cost structure.
Path for revival
As SGX Chairman Koh Boon Hwee emphasised: “A vibrant stock market is not just one among many aspects of being a financial centre — it is a fundamental pillar. If this one pillar were to falter, the whole is put at risk.”
The Singapore Institute of Directors’ efforts in promoting better board governance through director education and its director accreditation program where aspiring directors undergo a certified examination represents a step towards improved governance. However, other structural and regulatory framework changes require government intervention.
In conclusion, revitalising SGX requires a holistic approach that goes beyond liquidity injections. Fundamental issues in listing quality, board governance, regulatory structure, and trading costs need to be addressed first. Singapore’s position as a leading financial hub depends on its ability to execute these fundamental reforms to revitalise SGX and restore investor confidence.
Lee Ooi Keong is a former Temasek director and member of the Singapore Institute of Directors with 30 years of experience in investments, corporate performance and governance
