Improving Investor Sentiments of Singapore’s Stock Market
The Singapore stock market, once a beacon of vibrancy and opportunity, has seen better days. The golden era of 1993, when the Straits Times Industrials Index soared nearly 60%, seems like a distant memory. Today, the market struggles with low liquidity, poor valuations, and a steady stream of delistings. These actions have prompted concerns among investors and market practitioners.
The market’s nadir was evident in 2023, a year that saw only six initial public offerings (IPOs) raising a paltry US$35 million. In stark contrast, regional peers like Indonesia recorded 79 IPOs, underscoring the severity of Singapore’s market woes. This trend continued into 2024, with only one minuscule IPO in the first half of the year.
Mr. S Nallakaruppan, president of the Society of Remisiers (Singapore), laments the market’s stagnation. He recalls the enthusiasm of the past, particularly the landmark public listing of Singapore Telecommunications (Singtel) in 1993. The market drew unprecedented interest and trading activity. Today, he argues, a “big bang approach” is necessary to reinvigorate the market. He suggested the listing of another substantial government-linked company.
Investors seek radical approach to Singapore stock market revival
However, some experts believe more radical measures are required to improve the stock market. One proposal includes allowing pension and sovereign funds to invest in the local bourse, akin to practices in Australia and Thailand. Despite this, Second Minister for Finance Chee Hong Tat recently dismissed the idea of directing the Government Investment Corporation (GIC) to invest in locally-listed firms, advocating instead for a sustainable approach focused on nurturing good companies to list on the Singapore Exchange (SGX).
Moreover, industry analysts highlight the need for enhanced corporate governance and investor engagement. Initiatives such as Japan’s “Value Up” programs, which have successfully improved stock valuations, could serve as a model. In Singapore, 67% of SGX stocks trade below book value, indicating a pressing need for reforms.
To boost market liquidity, fostering a vibrant ecosystem through better investor relations and active promotion of smaller-cap stocks is crucial. Engaging retail investors and providing incentives for companies to maintain high valuation standards could also help.
Lastly, restructuring corporate frameworks, as demonstrated by successful examples like Sembcorp Industries and Keppel Corp, shows that streamlined capital structures and higher returns can attract investor interest.
Reviving Singapore’s stock market will require a multifaceted strategy involving government support, regulatory reforms, and active participation from all market stakeholders. The goal is clear: to restore the market’s dynamism and reaffirm Singapore’s position as a leading financial hub.
