MAS sets up review group to improve Singapore stock market

THE Monetary Authority of Singapore (MAS) has set up a review group to recommend measures to aid in the development of the equities market in Singapore, it said on Friday (Aug 2).

The panel will be chaired by Second Minister for Finance and MAS board member Chee Hong Tat, and include private-sector stakeholders and public-sector representatives.

MAS said that the group will build on existing initiatives introduced by the government to support enterprise financing and enhance the local equities market. These initiatives include funds to support initial public offerings (IPOs) of high-growth companies, the introduction of corporate structures and share classes to facilitate such listings, and measures to improve research coverage.

MAS added that the group will come up with measures to support companies listed on the Singapore Exchange (SGX) and encourage them to expand globally.

The group will also review regulatory frameworks such as the listing regime, and recommend measures to attract primary and secondary listings to Singapore.

It will propose measures to facilitate product offerings and improve liquidity in the equity market here to increase the pool of potential IPOs.

Lastly, the group will formulate strategies to make the Republic’s equity market more attractive to issuers and investors.

Chee said that it will assess the effectiveness of existing measures to improve the equities market as well. These measures include efforts to tie up with other overseas exchanges, as well as funds that have been put in place to develop local companies, with a view to listing them on the SGX.

Asked why the review group was being formed now, Chee replied that the government has spoken to various stakeholders over the past few months and seen the need to do something about the local equities market. “Because there are different ideas, different views, we thought the most effective way for us to move forward, and to tap the views of the various groups of stakeholders and experts, was to form this review group,” he explained. He added that while there would be differences in opinion, the group would decide collectively on the best set of measures that are “practical and actionable”.

The review process will involve people from various fields, such as corporate finance and investment banking. The group will recommend measures and complete a report within 12 months.

“A dynamic equities market is an important part of the capital-formation value chain, alongside Singapore’s growing private equity and venture capital ecosystem,” said MAS. “A deep and liquid public equities market enables companies to access capital as they expand regionally and globally.”

Different workstreams

MAS said that some in the review group will examine enterprise and markets, while others will scrutinise the regulatory aspect.

Those examining enterprise and markets will address market challenges and develop measures to encourage companies to list. They will be led by Lee Chuan Teck, chairman of EnterpriseSG.

The regulatory side will look into improving regulations to support market growth and boost investor confidence under the leadership of Chia Der Jiun, managing director of MAS.

Other members of the review group are:

• Dilhan Pillay, chief executive of Temasek
• Euleen Goh, chairman of Singapore Institute of Management
• Koh Boon Hwee, chairman of SGX
• Lai Chung Han, permanent secretary for development in the Ministry of Finance
• Lim Ming Yan, chairman of Singapore Business Federation
• Neil Parekh, partner and head of Asia, Australia and New Zealand at Tikehau Capital
• Png Cheong Boon, chairman of Singapore Economic Development Board

‘Long overdue’ review

Jimmy Ho, vice-president of the Society of Remisiers (Singapore), said that a review of local equity markets is “long overdue”, adding that liquidity has declined partly because other countries in the region have built up their financial markets.

He suggested that the authorities look into setting up a committee to advise on the pricing of IPOs on the Republic’s stock exchange.

“Nowadays, when people touch IPOs, they lose money, so why would they be interested in getting involved in IPOs?” he asked, adding that companies should leave some premium for investors seeking to enter this fray.

Furthermore, he has noticed that companies are increasingly listing by way of placement shares, which are inaccessible to the broader public.

“You don’t want the public to benefit, and yet you want the market to come in and support (such listings); it’s simply not logical,” he said.

He also suggested that Singapore deploy its state investment firms as anchor investors of sorts, to invest and bring vibrancy back to the stock market – but this idea has received pushback from the government in the past.

On Jul 2, Chee said in Parliament that directing GIC to invest in locally listed companies would not be the solution to enlivening the nation’s equities market, as its role was to achieve good long-term returns. “GIC must therefore continue to make professional investment decisions, and the government should not direct or interfere with its investment decisions,” he noted.

Securities Investors Association (Singapore) (Sias) chief executive David Gerald said that the association was encouraged to see the government seriously addressing issues that have been plaguing the local stock market for several years.

He added: “We hope the regulators can enhance the regulatory regime to foster investor confidence and facilitate market growth because it is good to have a vibrant and liquid market.”

He suggested that the review group consider following the lead of Japan and South Korea, where listcos are required to do more to unlock value from the perspective of investors.

He suggested that more investor education and free research findings on companies should be made available to investors as a public service.

Venture Law managing director Lock Yin Mei said that she looks forward to the findings of the review group, noting that the last time one such panel was formed to examine the local equities market could have been in the 1990s. Back then, the Corporate Finance Committee, made up of mostly private-sector leaders, released a consultative paper on the local securities market. Its recommendations were later adopted in the crafting of the Securities and Futures Act in 2001.

She noted that the review also comes as markets such as the UK and Europe are paying close attention to their equities markets as they lose their home-grown companies to US markets.

On Jul 11, UK regulators overhauled listing rules in a bid to attract companies to list in London. The changes included allowing companies to carry out more activities without having to put them to a shareholder vote, and making it easier for companies to have two classes of shares.

She suggested that the review group look into how markets such as London and Hong Kong are responding to their respective challenges, and study the success stories from Japan, for example.

In its statement, SGX said that it welcomed the announcement of the review group. “Only a whole-of-ecosystem approach can lead to transformative actions that will give fresh impetus to improving liquidity and listings in Singapore’s equities market,” it said.