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Wooing back share investors
THIS WEEK'S TOPIC: What will bring investors back to the Singapore stock market?
Loh Boon Chye
THE idea of a silver bullet to transform our securities market is an appealing one, not only for observers and industry players but also for the exchange.
The game plan in reality however, needs to factor in diverse needs of participants, changing market trends, multiple microstructure levers and the complex relationship between these parts.
The mid-day break, on its own, was designed primarily to compress liquidity. Along with other adjustments and more importantly with the ecosystem's support, we are seeing positive momentum in trading activity and listings.
To turn this into a sustainable cycle, we need active participation from all quarters - from equity analysts, brokers, banks and fund managers to government agencies, retail investors and the media.
We will continue to take feedback from our stakeholders and calibrate our actions accordingly; we all share the same goal of a vibrant market.
Co-founder and COO
A FOCUS on short-term returns and yield has shifted investors' interests towards risk-averse opportunities such as Reits and fixed income products; this has impacted the liquidity of and number of listings on our local bourse.
We believe that enhancing public awareness of the importance of the equity capital market, as a driver of business and economic growth, will stimulate greater interest in investing in listed companies and local IPOs.
Private companies will have a deeper capital market to tap, and be spurred to list here, which gives investors more options for investments as well as portfolio diversification.
This is a win-win situation: there is greater availability of growth capital for businesses and potentially higher risk-adjusted returns for investors.
With SMEs constituting around 90 per cent of regional enterprises, leveraging technology to reduce the significant costs involved in the listing process could also spur the entry of everyday, relatable businesses, encouraging increased participation from retail investors in brands they can identify with.
Managing Partner - Singapore
CMS Cameron McKenna Nabarro Olswang (Singapore) LLP
AS a professional advising listed and unlisted technology companies, liquidity is a problem for the SGX versus Hong Kong or any of the UK or US exchanges in particular.
A lunch break won't help but the recent permission for companies with dual class share structures (such as those adopted by FANG*, and more relevant for Singapore, Sea) to have a secondary listing in Singapore should help drive investor traffic to the exchange.
*Facebook, Apple, Netflix, Google (now Alphabet)
Schweizer World Pte Ltd
BUSINESS never stops when humans take a break.
In today's world, we are privileged to take that break while letting intelligent machines do the repetitive tasks.
The world's top stock exchanges are getting increasingly competitive and it has become increasingly difficult to differentiate among stock exchange competitors while investors eye higher multiples of IPOs at China stock exchanges.
As such, forward-looking MAS and SGX started to explore the use of blockchain technology for bond trading in March 2017.
Technology is indeed the key to differentiation. Speeding up and being an innovative first-mover can enable SGX to become the world-leading stock exchange for the next decade that will be driven by the fourth industrial revolution based on artificial intelligence (AI) and Internet of Things (IoT).
Further digitisation of SGX besides bond trading, through automated and technology-augmented investment possibilities, will increase liquidity while it remains an efficiently regulated and safe place for listed companies.
Why not an SGX-listed cryptocurrency?
Chief Executive Officer
RHT Holdings Pte Ltd
THE return of the lunch break for brokers is a welcome move for the brokerage community as continuous trading across the lunch hour (as has been noted) does not boost trading liquidity.
A lunch break will be an opportunity for brokers to have a brief respite from a busy morning and a chance to network among themselves. This can only be good for morale and concentration.
However, boosting trading liquidity in the stock market is a much more complex and long-term issue involving a host of factors such as market sentiments, informational flow and transparency as well as market depth.
In my view, the return of a lunch break is a positive signal in the right direction - demonstrating regulatory flexibility and a real commitment in addressing the needs of the brokerage community.
Founder & Chair
Terrific Mentors International Pte Ltd
IN order to continue attracting investors, Singapore companies must demonstrate their capabilities in current and developing technologies. We already have a good grasp of financial management and need to show that we can cope with new fintech advances.
When building strong companies, human resources is forefront in everyone's mind. Singapore must have the talent available, and demonstrate that even if expensive, this talent is managed in a modern, open and challenging manner.
I also think greater investment in tourism is important - every tourist is a potential investor, influencing numerous other investors. Singapore needs to make a "splash" so the world can be reminded of its versatility.
Lim Soon Hock
PLAN-B ICAG Pte Ltd
STOCK markets elsewhere, for example in Hong Kong, New York and London, continue to outperform Singapore because of better liquidity, more institutional investors and a more mature investment community.
Singapore will have to surpass in all three areas to attract and bring back more investors.
For investors, it is all about getting the most returns from maximum valuations in the shortest possible time. In this regard, the Singapore market has some way to go. That it is the safest and best regulated do not necessarily meet with investors' expectations or wants.
Chief Executive Officer
BRINGING back the lunch break is well-intended; however, in order to really help remisiers we also need to look at reforms that will promote growth in trading volumes and revive the stock market.
One way to drive interest in the SGX is by bringing in more listings. I believe continuous investment in innovation will be very important in this regard.
As a regional innovation hub, Singapore will be well-positioned to get listings from high-growth and attractive companies, both homegrown and international players. This will create more confidence in the stock market and help boost investor interest.
Robin C Lee
Bok Seng Group
WHETHER our stock exchange takes a break during lunch should be the least of our concerns amid more pressing issues of ever-shrinking volumes from all angles. Online trading has been going on for the longest time and it should be no mystery to anyone as to why brokerage fees and volumes are dwindling.
As with all disruptions of late, intermediaries are rapidly being replaced by technology.
What SGX really needs is to channel its attention towards cultivating a deeper grasp of why companies are privatising, with some of our very own homegrown companies even uprooting and trading their stock elsewhere.
Fundamentally, to keep investors, we need to stop losing good companies on the exchange; then we need quickly to do something differently, be it regulatory or structural, towards attracting new companies to bring investors back.
Chief Executive Officer
General Storage Company Pte Ltd
AMID the rise of online trading platforms offering lower fees and convenient access to overseas markets, reinstating the lunch break will not save the jobs of stockbrokers who play no more than an intermediary role between their clients and the stock market.
Besides, private investors, especially millennial investors, are more savvy these days, preferring to do their own research, avail themselves of the myriad tools available online, and invest in volatile markets offering more immediate returns.
In order to attract investors, the Singapore Exchange needs to boost liquidity by further diversifying the investment instruments offered here.
The Adecco Group
TECHNOLOGY is leading to three key changes in equities trading - disintermediation, creation of new investment products and providing investors access to wider markets.
Moreover, the investor profile is changing and, with it their needs and behaviour. The lunch break will provide a rest to traders and reduce some shift costs for their employers but its effect on attracting investors may be marginal.
What's needed are targeted solutions that will help to boost trading volumes such as by attracting more institutional investors to the Singapore stock market.
In that regard, we believe that SGX's proposal to widen bid spreads for certain stocks and the mandate to set aside at least 5 per cent (or S$50 million) of initial public offering size, whichever is lower, for retail investors will be relatively more effective in addressing this challenge.
WHEN the lunch hour was abolished in 2011, trading volume was expected to increase by 10 per cent. But this failed to materialise, hindered in part by the S-chips' failure and the penny stock crash in 2013.
The emergence and greater adoption of online trading in recent years also had a big impact on remisiers' business, as investors can make their own trades independently and more conveniently, while incurring lower fees.
Unsurprisingly, therefore, the return of the lunch hour this year met with lukewarm responses, with few remisiers celebrating and most largely indifferent.
The lunch break will give remisiers the opportunity to wine and dine clients and possibly woo them back, while hopefully enabling them to return to their desks refreshed and energised, and with a clearer mind.
I personally feel that the return of the lunch hour won't do much to help lift the bourses. Overall, I believe it will have more qualitative benefits to remisiers' welfare and client relationships rather than quantitative benefits on trading volumes.
PeopleWorldwide Consulting Pte Ltd
S-CHIP debacles, penny stock problems and online trading are not the real reasons for SGX's poorer performance vis-a-vis other exchanges. It's the volume, velocity and valuation of stocks that drive the dynamism in any exchange.
Investors are drawn to exchanges with good companies and where there are strong research support, analyses and ease of funds flows. SGX must increase the volume and velocity of trades and build a reliable system and infrastructure to reduce instances of trading halts which can be disruptive. The few incidents in 2014-2016 were avoidable.
For the market to be dynamic and fluid, flow of funds must be facilitated and SGX should look into how this fluidity can be improved to allow more investors to shift their funds to Singapore to invest in the public companies.
To carry on with today's momentum without disruptive changes, SGX will not break out to win the confidence of investors to improve the volume, velocity and valuation of our public companies.
SGX needs changes. Re-instituting the lunch break is not a game changer.
Zaheer K Merchant
Regional Director (Singapore & Europe)
QI Group of Companies
ONE of the ways to attract investors back to the Singapore stock market is to increase the number of IPOs.
But solely relying on this strategy can be ineffective, due to the ever changing demographic profile of investors, and their mindset. As investors become more prudent, they are likely to be more risk-averse.
Therefore, effort must be capitalised on seeking out what investors truly want and whether that desire is readily available on the stock market to fulfil their demand.
This could be done by investing into funds that track widely watched market indicators, as evidenced by the experience of the central bank in Japan. In this respect, it is not simply a matter of scrapping the lunch break to increase trading volume.
After all, the trading activity from this lunch period only accounted for a meagre increase and has proved insignificant, but acting on data analysis and trends in order to bring vibrancy back to the stock market.
Edwin Khew Teck Fook
The Institution of Engineers, Singapore
IT IS important for Singapore to continue to strengthen its competitive propositions such as tax benefits, free trading environment and financial stability, to pull more investors to its stock market.
We also need to bolster the growth of our manufacturing sector as it represents a fifth of our economy; as well as property and other 'conventional' sectors to keep our stock market robust.
In addition, Singapore would also need new catalysts, from fintech innovations to deep-tech startups, to motivate investors and breathe new life into the stock market and high tech manufacturing in Singapore.
To achieve this, we will need to keep going, steadily and with a sharp focus, to create a core of highly-skilled workforce and engineering talents capable of harnessing technology to support economic growth.