Shares of the Singapore Exchange (SGX) jumped more than 5 per cent on Monday (Feb 24) morning following the announcement of initiatives to revive the stock market by a review group led by the Monetary Authority of Singapore (MAS).
They include a S$5 billion initiative, called the Equity Market Development Programme, which will channel the funds to asset managers with a “strong investment track record” and a focus on Singapore-listed equities, MAS said on Friday.
Beyond strengthening the fund management ecosystem, the S$5 billion injection also seeks to boost trading liquidity and encourage more research into Singapore-listed companies, said Enterprise Singapore executive chairman Lee Chuan Teck.
SGX shares last pared some gains to trade up 3.91 per cent at S$13.3 by the market close on Monday.
Another key measure unveiled on Friday is a revision to the Global Investor Programme (GIP), which grants permanent residency to eligible foreign investors.
The Economic Development Board, which administers the GIP, will adjust the requirements for family offices, requiring them to invest a more targeted proportion of their assets directly in Singapore-listed equities. Under the revised rules, single-family offices must allocate at least S$50 million of their assets under management to equities listed on Singapore-approved exchanges.
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Overall, prospectus requirements and listing processes will be streamlined, particularly in areas such as financial disclosures, interested-person transactions and conflicts of interest.
Friday’s announcements mark an update on the measures from the MAS review group, following its Feb 13 tax incentive proposals.
Formed last August, the review group comprises private-sector stakeholders and public-sector representatives. Its aim is to enhance the competitiveness of Singapore’s equities market by attracting investor interest, increasing the supply of quality listings and streamlining the regulatory process for initial public offerings.
“Particularly impactful”
Morgan Stanley highlighted two measures that it said were “particularly impactful”: the S$5 billion liquidity injection and the revised rules for family offices.
“These are bold and meaningful steps being taken by the authorities, in our view, and likely serve as re-rating catalysts that underpin our positive outlook for Singapore… it is substantial and impactful,” said the bank.
“The S$5 billion initial investment likely crowds in more private capital which, together with family offices (growing in number at an average of 400 new single-family offices per annum since 2020), could be the start of a ripple effect driving billions of dollars of incremental flows each year,” it added.
Morgan Stanley noted that MAS aims to unveil a second set of measures by the end of the year, saying the measures demonstrate there is “sufficient political will” to ensure that efforts to entrench Singapore’s position as a global financial hub are successful.
“A better-functioning equity market is key to kick-starting a virtuous circle of better trading liquidity and fairer valuation multiples, enabling more job creation and capital formation for the economy along the way,” it said.
Singapore’s benchmark Straits Times Index (STI) jumped to highs twice in the past month, alongside records also set by the shares of DBS, UOB and OCBC.
In the Budget statement last week, measures announced included a corporate income tax rebate for Singapore-based firms seeking a listing; enhanced concessionary tax rates for new fund managers which want to list locally and scale up their activities via public fundraising; and tax exemptions for fund managers which invest substantially in Singapore-listed equities.
Morgan Stanley reiterated its constructive view on Singapore stocks.
Last week, JPMorgan upgraded its call on Singapore equities to “overweight”. It said: “We upgrade Singapore equities to overweight in (the) Asean and Asia ex-Japan region on government support to the stock market, high dividend yields and government’s fiscal room to cushion the impact of an external slowdown.”
JPMorgan’s “bull-case target” for the STI is 4,200, while Macquarie’s year-end target for the index is 4,000, it said last week. The STI closed at 3,927.75 on Monday.
Beyond government efforts to boost the local equities landscape, inexpensive valuation, lower volatility compared to its regional peers and decent earnings expansion were other reasons cited by JPMorgan analysts for their upgrading of Singapore equities.
However, Macquarie said: “Our interaction with investors suggests they need to see material demand-side measures driving more funds, to get more positive on SGX.”
Specifically, this refers to involving sovereign wealth fund GIC or the Central Provident Fund Board in supporting the local equities market. “However, recent disclosures from the government appear to rule these out,” Macquarie analysts added.
