TO REVIVE Singapore’s equities market, the Monetary Authority of Singapore (MAS) is ready to make bold yet necessary changes after carefully reviewing their trade-offs, said Transport Minister and Second Finance Minister Chee Hong Tat on Monday (Sep 16).
The MAS’ review group, which he chairs, has come up with ideas and is ready to implement the measures in phases after assessment of relevant risks, he said in a speech at the Securities Investors Association Singapore (Sias) 25th anniversary event and the launch of the Corporate Governance Conference 2024.
He highlighted that it is not a guarantee that the measures will succeed, especially given the global market headwinds and increasing competitions, but taking “some calculated risks” will offer a chance to turn things around for the local bourse.
“Although we have identified some ideas from our engagements with industry stakeholders, it is not a given that all these measures will succeed. But we are prepared to make changes and try new ideas,” said Chee, as he provided an update on the ongoing review.
He noted that the review group, in assessing measures, will focus on Singapore’s unique value proposition to investors and the companies who are seeking listings.
Examples include building Singapore as a leading real estate investment trusts (Reits) hub by identifying a market need and creating a supportive regulatory ecosystem for such growth. The Republic today holds the largest Reits market in Asia ex-Japan, Chee highlighted.
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“I believe there can be other such opportunities for Singapore’s equities market – not to go head-on against the larger exchanges, but to identify areas where we can add value by playing to our strengths.”
He added that a robust equities market facilitates successful initial public offering (IPO) exits, allowing for capital recycling into other early-stage enterprises.
“This completes a virtuous cycle of growth, innovation and a more vibrant financial market. This is why the government is considering policy measures and incentives to improve Singapore’s equities market and enterprise financing ecosystem,” said Chee, noting that these elements are important to support Singapore economy’s competitiveness.
Chee also highlighted that the review focus is not about Singapore Exchange (SGX) as a company, but about growing the Republic’s equities market into an attractive venue for local and regional enterprises to access funding and support for their innovation and expansion plans.
The review group, after engaging with its two workstreams and industry stakeholders ranging from start-ups to Sias representatives, has gathered ideas and grouped proposals into three categories:
1. encouraging pipeline of quality listings;
2. enhancing investor participation and broadening market liquidity; and
3. re-evaluating regulatory structures and approach.
Quality listings
Chee said that Singapore, with a vibrant existing startup ecosystem, offers a strong value proposition to growth companies in the country and from the region.
“A key target segment of companies that we hope can consider a listing in Singapore are those which are already based here. We will look at the incentives to encourage listing, and to reduce the costs of listing to lower entry barriers,” he said, adding that the review group is also exploring attracting growth companies from emerging markets in certain niches such as sustainability, fintech and innovation.
Meanwhile, Chee said that more startups are listing before being ready given the current venture capital funding winter.
“In this regard, we are reviewing how we can work with investors and fund managers to catalyse the secondary private fund sector to better support and nurture such late-stage start-ups in our ecosystem, as they grow and consider an IPO in the future.”
Improving liquidity
Around 85 per cent of securities daily average value traded on the SGX is attributable to the 30 large-caps that make up the STI, said Chee.
To improve liquidity, measures to catalyse broader investor participation from both institutional and retail investors are needed.
“Such measures include incentivising market makers to facilitate price discovery, broadening stock indices and expanding the pool of equity market derivatives. We will study these ideas and others, with the aim of boosting market liquidity in Singapore,” said the minister.
Re-evaluating structures
Chee said that some rules introduced over time may not be relevant to today’s market any more, and the review group will take a careful look at the current regulatory regime, and “prune” regulations when necessary.
“We will be guided by the principles of a disclosure-based regime that facilitates dynamism while having in place proper safeguards and avenues for investor recourse… There are important trade-offs which the review group and workstreams would need to discuss and assess – we are prepared to make bold changes, but we want to do so after we carefully assess the trade-offs,” said Chee.
He noted that one area is to streamline the prospectus disclosure requirements to lighten compliance burden for IPO issuers, while sharpening the focus on material disclosures and disclosure quality. The streamlining will also apply to disclosure requirements for secondary listings.
At the same time, the group might also consider lifting the regulatory burden to enable more investment options in the market, which will require investors to exercise more caution based on their risk tolerance.
“It will not be a one-size fits all approach, and one has to go in with open eyes and be mentally prepared for negative outcomes, which can happen with any investment,” said Chee.
He added that Sias will continue to play a key role in equipping retail investors with knowledge and tools to know what to look out for when investing in a company.
“We will also look into ways to strengthen our investor recourse framework, to better enable investors to seek redress in cases of market misconduct. The review group and workstreams will be happy to discuss possible options in greater detail with industry stakeholders, including Sias,” said Chee.
He noted that the review group does not intend to wait till the end of 12-month review period to implement the proposals. “It is better for us to stage the review and implement the measures in phases,” he said.
