A market wish list for 2024
AT THE start of a new year, it is customary to indulge in a spot of wishful thinking about the stock market – perhaps even more so this time, with 2023 proving to be an underwhelming year. The Straits Times Index (STI) closed the year down 0.3 per cent, a loss which would have been worse if not for a sudden push in the final three trading days that added 3.2 per cent.
To be fair, a great deal of the STI’s 2023 underperformance can be traced to the heavy weightage given to the banks and Jardine group within the index.
Bank profits are expected to either stagnate or decline in 2024 with interest rate cuts, while the Jardine stable has also come under pressure because of its exposure to a slowing China that is beset by property market woes.
That said, what might a 2024 wish list for the local market contain? For the sake of the local market’s development, perhaps a good starting point would be for special purpose acquisition companies (Spacs) to fulfil their promise.
The first Spac to successfully “de-Spac’’, VTAC, has not had an illustrious debut with its acquiree – live-streaming app 17Live – plunging almost non-stop since its listing in December. One other Spac, Pegasus Asia, has announced that it will dissolve and return investors’ money, but, the third, Novo Tellus Alpha Acquisition (NTAA) has denied rumours that it too is looking to shut down.
It should be noted that Spacs dissolving is not uncommon. According to a report by risk and financial advisory firm Kroll, the Spac market saw 123 liquidations in the first half of 2023.
Spacs are a relatively novel way of capital-raising and their growth would help cement Singapore’s reputation as a leading financial centre. The first wish would therefore be for NTAA, and other Spacs that might follow, to prove the doubters wrong.
A second wish would be for the Singapore Exchange (SGX) to woo not just Spacs and local small and medium-sized enterprises (SMEs), but also larger companies to add much-needed liquidity to daily trading.
The initial public offering (IPO) numbers for 2023 were undeniably modest. Excluding 17Live, there were only six SME listings, which raised a combined S$46.89 million and had a market capitalisation at listing of just S$269.03 million.
While size may not be a key factor, low liquidity and a general decline in interest in local stocks have been a problem for some years. Bringing in large, quality IPOs might help.
A third wish is for the investing public to respond more enthusiastically to a recent move to offer high-quality foreign stocks to local investors via the Singapore Depository Receipts (SDR) programme.
SDR holders are entitled to the same economic benefits extended to those who hold the underlying shares such as receipt of dividends declared but do not have voting rights.
Launched in May 2023, the first three SDRs were Thai blue-chips which are components of the Stock Exchange of Thailand 50 index. It was envisaged that, over time, that first attempt at enhancing regional connectivity would later extend to other countries within Asean.
Thus far, trading volume in the three Thai SDRs has been modest but sufficiently encouraging to hopefully prompt more to be added. If this occurs, the universe of investment options available to local investors would be vastly expanded.
