Singapore Exchange (SGX) Auditorium.
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Singapore regulators have been trying for years to make its stock exchange more attractive.
The city-state’s economy may be larger than Hong Kong’s, but the total value of companies listed on the Singapore Exchange is about seven times smaller.
total listing value SGX Securities Market It was S$798.55 billion (US$590.47 billion) in May.
at the same time, Hong Kong Exchange As of the end of May, the market capitalization was HK$32.9 trillion (US$4.21 trillion).
Analysts who spoke to CNBC said possible solutions include reaching out to investors and seeking to “evaluate” the value of projects such as Japan and South Korea.
liquidity in singapore
The Singapore stock market might previously have been described as “boring” and”boring“——But in fact, the overall performance of SGX straits times index Stronger than Hong Kong Benchmark Hang Seng Index.
The STI has shown an upward trend every year since 2021, except for 2023 when the stock market fell by 0.34%. In comparison, the Hang Seng Index has fallen for four consecutive years, with annual declines of more than 10% from 2021 to 2023.
However, the Singapore Exchange has been plagued by thin trading volumes, The number of delistings exceeds the number of listings.
Turnover speed SGX’s measure of market liquidity was 36% for the full year of 2023.
In comparison, data from the World Federation of Exchanges showed that the Hong Kong Stock Exchange’s turnover rate during the same period was 57.35% and the Japan Exchange’s 103.6%, indicating that Japan’s total trading volume exceeded its total market capitalization.
Lessons from Singapore
1. Pay attention to projects
Financial services provider Galaxy International said in a report on May 8 that one way to boost Singapore’s stock market may be to consider “valuation plans” in other major Asian markets such as Japan and South Korea.
Market regulators in Japan and South Korea have restructured their markets, issued new regulations and implemented plans to boost the value of listed stocks.
While South Korea has yet to report any results from these efforts, CGS International noted some promising results in Japan.
As of the end of September 2022, 50% of stocks listed on Japan’s main markets were trading below book value, suggesting that investors may not think the company’s book value is high.
Since the start of the 2023 reforms, this proportion has increased to 36% as of April 15.
In Singapore, Maybank Investment Bank Group estimates that 67% of SGX stocks are trading below book value, although CGS International noted that stocks such as real estate investment trusts are trading below book value due to the high interest rate environment.
CGS analysts said: “We note that in the cases of Japan and South Korea, the determination to improve stock market conditions was supported by the participation of top management of the exchanges as well as academia, market participants and relevant government agencies.”
this The Financial Times reported in May that SGX was reviewing the proposals Gain accreditation from the Venture & Private Capital Association of Singapore to enhance its appeal.
Government agencies including the Monetary Authority of Singapore, the Economic Development Board and the Ministry of Trade and Industry are involved in these discussions, the Financial Times reported, citing people familiar with the matter.
MAS told CNBC it “has received the proposals and is reviewing them,” while the EDB declined to comment. MTI has not yet responded to CNBC’s request for comment.
2. Investor participation
Analysts from Maybank and Galaxy International also pointed to the need for Singaporean companies to increase investor participation, which could revive market interest.
CGS said companies should consider investor relations activities such as investor relations meetings, investor roadshows and analyst briefings as key performance indicators, adding that investor relations activities can generate interest in smaller companies.
Thilan Wickramasinghe, head of research at Maybank Investment Bank Group Singapore, stressed that years of industry consolidation have resulted in a serious underinvestment in equity research.
Therefore, more studies focus on large-cap, liquid stocks while ignoring small-cap stocks. “If small and mid-cap stocks don’t get enough investor attention, they suffer from lower valuations and lower liquidity,” Wickramasinghe said.
This creates a negative feedback loop, with illiquid stocks becoming less attractive for research coverage, resulting in declining valuations and liquidity.
“Increasing access to investors and providing better guidance to Wall Street are good things that can drive value,” he said.
CGS said that in the case of exchanges, some possible measures include incentives such as tax benefits and adjustments to listing fees for companies that increase their valuations.
3. Reorganization
Wickremesinghe noted that “there is still no single magic bullet solution”.
He noted that Japan and South Korea, for example, are looking to increase dividend payments, but Singapore is already a major dividend-dominated market in the region and this segment of income investors is already well catered for.
For him, companies should continue to invest in simplifying their capital structures and focus on driving the higher returns that the market tends to reward.
Wickramasinghe noted that Singapore-listed companies include Sembcorp Industries and Keppel Corporationthese companies have restructured their capital structures over the past few years and outperformed the market “significantly”.
Call for revitalization of stock market
To be sure, calls to reinvigorate Singapore’s stock market are not new.
In 2015, a group of Singaporean remisiers Sign appeal letter The government seeks emergency measures to restore confidence in the Singapore stock market.
In February this year, retailers association Financial authorities were again urged to do more to revive interest in Singapore’s stock market.
The issue was debated in Singapore’s parliament, with Finance Minister Lawrence Wong stressing that “conditions for the Singapore stock market remain challenging”, adding that with interest rates “prolongedly high”, companies with strong growth chose to remain private, while those that were listed Companies are more market-oriented like the United States
Ng, who is now prime minister, said that while the government will continue to encourage companies incubated in Singapore to list in Singapore, “the final listing decision will be made by the companies”.
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