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FORMER investment banker Loh Boon Chye, who assumes his new role as chief executive officer of the Singapore Exchange (SGX) on Tuesday this week, should helm an exchange that is entirely profit-driven with no regulatory functions, says David Gerald, president and CEO of Securities Investors Association of Singapore (SIAS).
In an exclusive interview with BT, Mr Gerald also said that SGX should think "out of the box" to help companies pursue business opportunities in India and Africa.
Commenting on SGX's role as a frontline regulator and a listed commercial entity, Mr Gerald, who had previously also spoken against the dual role, said "a policeman cannot do business with its citizens".
"The Monetary Authority of Singapore has indicated that it is willing to reconsider the dual role. It is time to relieve SGX of its regulatory role and allow MAS to be the sole regulator. This would then allow SGX to concentrate fully on its own growth as well as the companies listed here," said Mr Gerald.
"If companies are moving into India and Africa as they already are, then the exchange must help these companies. Ascendas, Singtel, PSA and Temasek have all successfully made forays into India and Africa."
He suggested that SGX look into setting up a separate arm within the exchange to help local companies set up joint ventures in these countries, whilst helping companies to list here.
That SGX operates as a listed regulator has long been a source of complaints from various sectors of the market, this despite several safeguards to ensure conflicts of interest are properly dealt with and resolved.
In an article published in BT on June 26, MAS deputy managing director (financial supervision) Ong Chong Tee noted that new exchanges are being established in Singapore.
"In a more competitive multi-exchange landscape, there is a need to mitigate potential conflicts of interests and ensure efficiency in regulation. For example, there could be scope to reduce any overlaps between the oversight functions of the MAS and the exchanges," wrote Mr Ong. He also called on industry stakeholders to work together to build a vibrant securities market.
Agreeing with Mr Ong, Mr Gerald noted that SGX's new boss will have to urgently address integrity and liquidity issues.
"The answer to the question of why many investors are still out of the market does not require much thinking," he said. "It is loss of confidence and fear. To them, caveat emptor means nothing and they tend to hold SGX responsible. This has to be an area of concern for the new CEO - to bring confidence back."
Citing the case of China Sky which was suspended four years ago for failure to comply with a listing rule requiring a special audit, Mr Gerald noted that the stock remains suspended with no updates, which adds to the frustration and disappointment of shareholders. "There may be good reasons for delay in some cases but there needs to be more transparency," he said.
On the oft-discussed subject of declining liquidity, Mr Gerald pointed to the approximately S$56 billion lying in fixed deposits that fail to earn returns to cover inflation and that depositors may be willing to put into suitable investment products if only they know about their existence or how to access them.
"There is a lack of skill in managing risks in the products and also absence of advisory services to help retail investors make an informed decision..Although SGX has introduced several initiatives to educate the public through online and physical programmes like roadshows, more needs to be done," said Mr Gerald.