Investing GIC funds ‘not the solution’ to make Singapore’s equity market more attractive: Chee Hong Tat
The sovereign wealth fund’s mandate is to preserve and enhance the international purchasing power of the nation’s reserves, says the minister
DIRECTING Singapore’s sovereign wealth fund, GIC, to invest in locally listed companies is “not the solution” to make the Republic’s equity market more attractive, as this would compromise the government’s intention in setting up GIC, said Second Minister for Finance Chee Hong Tat on Tuesday (Jul 2).
This will not benefit Singapore and Singaporeans, added Chee, in response to a parliamentary question from Liang Eng Hwa, Member of Parliament for Bukit Panjang Single-Member Constituency.
Liang had asked if the government would consider the suggestion from some industry players that GIC should allocate part of its investments to securities listed on the Singapore Exchange (SGX), to help revitalise it. GIC manages Singapore’s foreign reserves.
The issue of whether GIC should expand its portfolio to include the Singapore market resurfaced recently after Financial Times reported that SGX is reviewing proposals from the Singapore Venture and Private Capital Association to boost the local bourse.
These include allowing pension and sovereign money to be invested in the stock market.
Market watchers had also told The Business Times that it is time to seriously consider investing GIC funds in the local stock market to boost valuations and investor confidence.
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The calls for GIC to support the local scene come as other countries such as Japan and Australia have undertaken measures to boost their stock market. For example, Japan’s Government Investment Pension Fund (GPIF) allocates part of its portfolio to Japanese bonds and equities. Australia’s sovereign wealth fund, Future Fund, invests in local equities as well.
Chee, who is also the transport minister, said that GIC’s mandate is to preserve and enhance the international purchasing power of Singapore’s reserves. Its investments must aim to achieve good long-term returns.
“GIC must therefore continue to make professional investment decisions, and the government should not direct or interfere with GIC’s investment decisions,” said Chee.
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GIC can already invest in appropriate Singapore companies if these have a global footprint and generate good returns, he added.
A “more sustainable way” to develop the local equity market, said Chee, is to have a pipeline of good companies listing on the SGX. The government will continue to groom and develop local companies with such potential, and help SGX-listed companies expand overseas so that they become more attractive to global investors.
“The government remains open to new ideas and measures to improve our equity market and support business growth. We will continue to work with industry stakeholders on this goal,” said the minister.
In a supplementary question, Liang asked how Singapore’s investment agencies – such as GIC, Temasek and the Monetary Authority of Singapore – can strengthen the nation’s status as a premier financial centre given the scale and sophistication of their investments.
Chee replied that Singapore’s financial sector is doing well. It is the largest foreign exchange centre in the Asia-Pacific, while SGX is one of Asia’s largest bond-listing venues.
Nevertheless, the government recognises that more can be done to grow the local equity market segment, and is working closely with the industry to do so, he said.
Government investment entities such as Temasek and GIC do invest locally, he noted. “But I think there’s a difference between asking them to make those investment decisions based on returns and what is in their best interests for shareholders (who) are Singaporeans, ultimately, versus (the government giving) them a directive to invest locally.”
Non-Constituency MP Leong Mun Wai asked if the government has “an integrated plan” to revive the equity market. Chee replied that the government has plans to work with industry partners on this, adding that some ideas are more viable and sustainable than others.
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