Reviving Singapore’s Stock Market: Lessons from Major Asian Markets
Singapore’s regulators have been attempting for years to boost the appeal of its stock exchange, the Singapore Exchange. Despite possessing a larger economy than Hong Kong, the total value of SGX-listed firms is almost seven times lower. As of May, the whole listed value of the SGX was 798.55 billion Singapore dollars (0.47 billion), while the Hong Kong Exchange had a market capitalization of 32.9 trillion Hong Kong dollars (0.21 trillion).
According to reports published in a reputable publication, Singapore could benefit from researching methods used in other big Asian economies, such as Japan and Korea.
One potential solution is to engage more with investors and consider “value up” programs similar to those in these countries.
Performance and Liquidity
While Singapore’s stock market has been characterized as “boring” and “unexciting,” the Straits Times Index (STI) has generally outperformed Hong Kong’s Hang Seng Index (HSI). The STI saw yearly gains every year since 2021, except for a slight decline of 0.34% in 2023. In contrast, the HSI experienced four consecutive years of losses from 2021 to 2023, with declines exceeding 10% annually.
However, SGX faces challenges such as thin trading volumes and more delistings than new listings. The turnover velocity at SGX, which measures market liquidity, was 36% in 2023. For comparison, the Hong Kong Stock Exchange had a turnover velocity of 57.35%, and the Japan Exchange saw 103.6%, indicating trades that exceeded its total market cap.
Japan and South Korea
Financial services provider CGS International proposed that Singapore could adopt “value up programs” like those in Japan and South Korea. These programs involved reorganizing markets, enacting new regulations, and implementing initiatives to boost stock value. Japan has seen positive results, with the percentage of stocks trading below book value improving from 50% in September 2022 to 36% by mid-April 2023. In Singapore, about 67% of SGX stocks were trading below book value, partly due to the high-interest rate environment affecting real estate investment trusts.
Boosting Investor Engagement
Analysts from Maybank Investment Banking Group and CGS International emphasize the need for Singaporean companies to enhance investor engagement. Activities such as investor relations meetings, roadshows, and analyst coverage can generate interest in smaller companies.
Measures like tax benefits and adjusted listing fees for companies that improve their valuations could be considered. However, there is no single solution. For instance, while Japan and South Korea are increasing dividend payouts, Singapore is already a key dividend-led market, well-suited to yield investors.
Restructuring and Calls for Revival
Wickramasinghe from Maybank Investment Banking Group suggests that companies should continue investing in streamlining their capital structures and focus on driving higher returns. Examples like Sembcorp Industries and Keppel Corp., which have restructured and outperformed the market, demonstrate the potential benefits.
