Following our first speculation last June, it finally happened. On Feb 21, the Equities Market Review Group, which many had eyed with scepticism when formed two months later, unleashed a whole salvo of market revival measures. It is “not just one silver bullet because there isn’t one” and it is meant to be “comprehensive, holistic”, declared Second Finance Minister Chee Hong Tat, who chairs the group.
The review group, which engaged a broad section of stakeholders, initially promised to complete its work in a year. Instead, it came out with a $5 billion bang in just half a year, to be allocated to fund managers eager for a share of this mandate to invest in smaller local stocks.
Pray – and it may be answered
Besides a host of other measures to stimulate demand, such as boosting the Grant for Equity Markets Singapore (GEMS) scheme first introduced in 2019 under my watch, the review group also promises to shift our regulatory philosophy and structure from merit-based towards real disclosure — subject to further public consultations.
The group has looked into the abyss and has decided to take the risk and jump and dish out this $5 billion to catalyse demand and also help reboot the local fund management industry, which grew in size and stature over the years but has left the local capital market behind.
As Chew on This had previously indicated, if this review was to make a difference, a significant sum of public money is an essential hinge factor, albeit one with the biggest risk for policymakers should the review fail.
For now, many on the street are delighted with this initial step, knowing that there are other potential institutionalised fixes for demand in the back pocket that can potentially be activated. Hopefully, that may be unnecessary. The gauntlet has been thrown to the many market complainers to get into some real market action within this refreshed market ecosystem.
On the supply side, the slew of measures ranging from tax incentives to listing grants should help prompt a rethink among initial public offering (IPO) aspirants, overseas companies looking for a secondary listing, and, of course, Singapore companies already listed overseas.
See also: MAS Review Group’s proposals may boost short-term returns, but will it be sustainable?
Orphaned in overseas markets, especially the US, numerous homegrown companies such as PropertyGuru and TDCX have struggled with post-listing valuations or received scant trading interest. Often, they end up delisted at a discount to the IPO price and have to find ways to extricate themselves, like leaving their “shells” to be then sold. Micro-caps, the likes of MaNaDr, had their Nasdaq moments, too, but ended up in the news for the wrong reasons. Meanwhile, promoters who brought them to their overseas listings have already banked their fees. For those deserving, such as Sea, let’s welcome them home.
Patience – is required
For the group, the next phase of work is to be completed by the end of the year. These include measures to lift the shareholder engagement capabilities of listed companies, sharpen the focus on shareholder value, broaden and deepen cross partnerships of the Singapore Exchange (SGX), and, perhaps, also introduce market microstructure changes such as reducing board lot sizes to bring in new retail investors, beef up investor protection through enhancing recourse avenues and also improve post-trade custody efficiency.
In the meantime, a lot more has to be done. There will be public consultations, getting alignment with market participants and then the implementation of the regulatory changes. The changes, if successful, should enable freer play in the markets by eliminating well-intended but negative market signals such as trading queries and the Watchlist, which is almost equivalent to an iron brand on the forehead.
See also: STI gives up day’s gains to close 0.06% lower on Feb 24
Listing reviews will be simplified too, including secondary listings of companies already quoted on recognised primary market jurisdictions — a longer red carpet for the return of prodigal sons and daughters. The consolidation of listing suitability and prospectus disclosures review with a single regulator, SGX RegCo, instead of the Monetary Authority of Singapore (MAS) as well, will help reduce uncertainty and speed up the process. It also means market professionals have to step up and be accountable if market discipline is to be the paramount guide in ensuring the quality and success of new issues.
Regulators will need to have teeth to enforce, but we need to recognise that enforcement can only happen after the fact. If we want pre-emptive enforcement that has been in place since 2013’s Penny Stock Crisis, then we will have merit-based regimes but poorly functioning markets.
Investors, too, need to understand what market discipline means: they are to be responsible for themselves and their choices. They cannot grumble about regulatory interventions getting in their way of making a quick, opportunistic buck and then whine for protection when their speculative punts go wrong.
It is also time to stop lamenting the lack of investor protection and losses from company failures. The latter is part and parcel of capital markets. If one makes a poor investment decision, or companies cannot compete and fail, take such occurrences as an inherent risk of being a business.
Smaller companies are by definition riskier, but potential rewards higher. If one were to venture into such punts be it on the Nasdaq or Hong Kong, it is “buyer beware”. If we are prepared to accept no MAS protections or in spite of MAS warnings, fall prey to stock and crypto scams elsewhere, why should we not be prepared to take this responsibility for ourselves here? This bridge has to be crossed collectively by market participants including our local media. Caveat emptor can only work if we act as grown-ups. It is already SG60.
Everything Changes – if we understand how
Some are questioning the impact of the $5 billion to be deployed. Also, despite numerous calls from those with a holy fixation, the money is also not from GIC, whose charter is to invest our nation's reserves and not to support the local capital market. Others lament that $5 billion is equivalent to four or five days of average trading turnover; it is less than 1% of Singapore’s market capitalisation or 2% if measured without the free float.
Some IPO aspirants, especially the larger companies, question how relevant the $5 billion is for them, given that they may on their own seek to raise a good 10%-20% of that capacity.
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To be sure, this initial allocation of $5 billion is meant to be catalytic to boost interest and activity. We cannot have public investment funds completely distort the market.
Presumably, fund managers who won an allocation of this money would be seen to draw other institutional investors or raise retail investors to increase their pool. Besides the local names like Fullerton Fund Management and UOB Asset Management, other “global locals” like Schroders, Nikko Asset Management and Eastspring Investments are now incentivised to deploy more funds here
The review group, by indicating the $5 billion is to be invested in counters outside the Straits Times Index (STI), is in line with what Chew on This has flagged previously: that small- and mid-caps are the ones requiring fixing, when there is a gap getting cornerstones for IPOs and investor interest and hence valuation discounts for our SMEs. This industry knowledge has hollowed out since the deregulation of the broking commission in 1999.
In deciding the allocation of this $5 billion, the devil is in the details and in the execution: who to allocate to and how much? The group needs to foster a competitive ecosystem of fund managers with different styles, skills and expertise, from providing IPO cornerstone capital to unearthing hidden Catalist gems to helping mid-caps enter the big league.
There are old hands and war horses here who have long committed to the markets but may have since looked elsewhere or pared down their participation. I imagine they will be eager to be back in the fray again. This includes folks like Terence Wong of Azure Capital, Value Partners, Pheim Asset Management and ICHAM. Brokerage-centred outfits, such as PhillipCapital and CGS International, which has extensive coverage of local small and mid-caps, can help liven up the scene as well.
This first set of measures announced by the Review Group has come not a minute too soon. Since the start of the year, five counters have hit the delisting “jackpot”. PEC and Econ Healthcare (Asia) shareholders were offered nice premiums last week, while Paragon REIT, SLB Development and Japfa had rewarded patient investors with fair exit offers earlier.
If the market appreciates the potential impact of the measures on mid- and small-caps, not as many may hit the delisting jackpot. Rather, our market, even outside of the STI component stocks, will be richly laid with value and growth opportunities.
Relight my fire, your love is my only desire,
Relight my fire ‘cause I need your love.
UK boyband Take That in 1993 released their hit Relight My Fire. Chew On This had requested a rekindling of that fire in our markets (The Law of the Jungle, issue 1177), but there was no mention of the $30 billion postulated, nor has structural private and public pension reforms for the possibility of recycling some of our savings and capital into the markets.
If the number of new single-family offices applying through the Global Investor Programme (GIP) here grows by just 25% over the 1,600 already here, the $50 million required from each of them could result in a total inflow of $20 billion into Singapore stocks, which means we can leave public funds untouched.
The initial measures have been cleverly thought out as an opening salvo. The anticipation has already lifted the STI to an all-time high ahead of the group’s announcement. Should the remaining embers in our ecosystem start to spread, and all parts of the marketplace rise up to the occasion and put money where their mouths are instead of just complaining about unfair valuations, we may well be on our way to another super bull market that coincidentally started in 1993. It is then not difficult to imagine investors and issuers suffering from the Pinkerton Syndrome with their US foray to be Back for Good. Take That!
Chew Sutat retired from the Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange. He was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
Read more about the equities market review group:
- Review group's measures can help 'break the inertia' of IPOs vs liquidity, says Clifford Lee of DBS (Feb 23)
- Equities market review group targeting ‘mid-sized but good-sized’ companies to list in Singapore (Feb 23)
- New family offices may contribute $15 billion to local bourse this year, suggests Maybank's Wickramasinghe (Feb 23)
- 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)
