Vasu Menon, OCBC Bank’s managing director of investment strategy.
SINGAPORE: A group representing the private capital sector has put up a range of suggestions that it believes will boost trading on the flagging local bourse and attract more firms to list in Singapore.
Their proposal reportedly includes requiring stock market participation from the private capital industry, and allowing money from pension funds to be invested in locally listed companies, said the Financial Times (FT).
The proposal from the Singapore Venture and Private Capital Association (SVCA) is being considered by the Monetary Authority of Singapore (MAS), a MAS spokesman said.
The proposal was also sent to the Singapore Exchange (SGX), Trade Ministry and the Economic Development Board, reported the FT.
They have declined to comment.
The SVCA proposal comes as more local tech companies are opting to list overseas, where they see better valuations and liquidity.
These include home-grown firms that have raised funds from local investors.
Singapore cancer diagnostics firm Mirxes refiled its draft prospectus on May 7 for an initial public offering (IPO) in Hong Kong, where it is aiming to raise around US$100mil. It first filed to list in July 2023.
Mirxes, which is backed by the likes of A*Star and Singapore’s state-linked EDB Investments, was last valued at around US$600mil, which would make its IPO among the largest for a Singapore biotech firm.
Last month, Singapore-based used-car marketplace Carro said it was preparing for a Nasdaq listing in New York to raise about US$100mil. The firm counts GIC and Temasek as investors and is reportedly valued at more than US$1.5bil.
Other Singapore firms such as ride-hailing and carpooling company Ryde and telehealth service provider Mobile-Health Network Solutions have also listed in the United States this year.
In contrast, only one company has listed on the SGX in 2024 – cancer-treatment provider Singapore Institute of Advanced Medicine Holdings, which raised around S$21.7mil in net proceeds.
Vasu Menon, OCBC Bank’s managing director of investment strategy, noted that requiring private capital to put money into the local stock market may not solve the SGX’s problem, “unless it also works concurrently at expanding the universe of attractive companies on the Singapore bourse for such capital to invest in”.
“Otherwise, there is a risk that such private capital may go elsewhere if we force their hands.
“Instead of mandating them, perhaps incentivising them to consider investing on the SGX could be a better option.”
Menon added that while allowing sovereign money and pension, such as funds from the Central Provident Fund (CPF), to invest in the stock market could be good for the local bourse, the bulk of this would likely be channelled into blue-chip stocks that have greater trading liquidity.
“So, the broader market, especially the small-caps stocks, may not see direct benefits. Nevertheless, if large pension and sovereign funds decide to buy into Singapore equities, it could give the local bourse and investor confidence here a boost.”
But Robson Lee, a partner for Kennedys Legal Solutions, said further enabling CPF funds to be invested in Singapore stocks would not be a reliable or sustainable solution to revitalise the local share market.
“The CPF is fundamentally a savings plan to help Singaporeans buy their homes, provide for their medical needs, fund their children’s tertiary education and build up their nest-eggs for retirement,” he said.
Citing the collapse of water treatment company Hyflux in 2021, Lee warned that “it would be a market and political disaster in Singapore if there are more such corporate failures affecting hundreds or thousands of CPF investors”.
Still, he noted that the authorities are anxious to correct the market perception that a well-rounded global financial centre like Singapore has a lacklustre stock market.“It is paramount that the authorities fix the fundamentals that have caused, and continue to perpetuate the perception that the Singapore market has poor trading liquidity and low valuations.”
These include limited stock research coverage, low valuations and poor corporate governance and regulatory enforcement, Lee said.
Efforts so far have included investments by the government-backed Anchor Fund @ 65 and Growth IPO Fund in a total of nine companies since 2022, when the funds were set up.
“Both funds are working closely with their portfolio companies to prepare them for IPO when the opportunity arises,” Trade and Industry minister Gan Kim Yong told Parliament in February.
He added that these moves complement a broader suite of initiatives to improve the attractiveness of the SGX for IPOs, including grant schemes to defray listing costs and research coverage of Singapore-listed stocks.But high interest rates and companies gravitating to deeper and more liquid exchanges are challenges that will remain for the Singapore equities market, deputy Prime Minister Lawrence Wong said in Parliament on May 8.
“These are global trends, and we have to be realistic about what we can do to change them,” he added.
“While the government will continue to encourage Singapore-incubated companies to list in Singapore ... the final listing decisions will have to be made by the companies themselves, based on their commercial objectives and growth plans.” — The Straits Times/ANN
