Overly prescriptive rules to encourage SGX listings for local companies may hinder growth: MTI

IF THE government takes an “overly prescriptive approach” by making government support to startups conditional on a local listing, it may “end up imposing a rule that may be at odds with the growth plans of the company”, Minister of State for Trade and Industry Alvin Tan said in Parliament on Wednesday (Oct 4).

Companies considering public listings have several commercial objectives in mind, which may prompt them to explore listing venues outside of Singapore, said Tan.

For example, they might decide to list where they can secure the best valuations for shareholders – for some, the US is attractive due to its deeper pool of investors and liquidity.

They may also choose to list somewhere close to their target market – for instance pursuing a China or Hong Kong listing if they are considering a business expansion in China.

“Similarly, global investors that are in Singapore will ultimately determine how to allocate their capital based on their strategies and how they view the market,” he added.

“If we prescribe that they must invest certain amounts in only locally listed companies, we will effectively constrain their investment mandates and end up losing a larger pool of investors that adopt a regional or a global view.”

In response to a question by Workers’ Party (WP) Member of Parliament He Ting Ru (Sengkang GRC) about the number of companies receiving agency grants who subsequently decide to move out of Singapore, and whether the authorities track why they decide to seek capital markets elsewhere, Tan said that the government does not track that data.

While Singapore offers funds and grants, a well-developed banking system and a range of financing options for listings, to better position the local equities market, “there’s also a limit, because ultimately, firms will have major considerations, commercial considerations”, said Tan.

WP MP Louis Chua (Sengkang GRC) asked about the government’s approach to the growing number of delistings, which could lead to a “downward spiral” due to perceived weaker valuations and lower liquidity.

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Tan noted that there has been a trend of delistings outnumbering initial public offerings since 2014, with 650 companies listed on the Singapore Exchange (SGX) as at April 2023.

There are a variety of reasons companies may delist, he said, naming their view on a particular market, an intention to list overseas instead, and an intention to seek different funding sources such as private funding, as possible reasons.

“I think it’s important for us to try to play a part, but there’s also a limit to what we can do to encourage listing.”