The Singapore Exchange (SGX) is close to finalising a deal with the city-state’s technology regulator, the Infocomm Media Development Authority (IMDA), to develop a system designed to encourage listing of local startups on the bourse.
A Bloomberg report that cited people familiar with the matter claims that the bourse will help pair technology companies with investors, with the aim of securing their listing in the city-state. SGX representatives approached by DEALSTREETASIA declined to comment.
IMDA oversees the technology, telecommunications and media sectors in Singapore. It is tasked with developing the city into a competitive global technology centre by 2025. However, the stock exchange has suffered in the last two years, with 23 delistings in 2016 and 18 delistings in 2015.
Recent years have seen stock exchanges worldwide compete to build their IPO pipelines. In South Korea, the Kosdaq board has been targeting tech startups in a bid to become a regional centre for technology listings.
The Kosdaq, the South Korean equivalent of Nasdaq, expects more than 100 companies listing on the board in 2017. It forecasts companies raising KRW 3 trillion ($2.6 billion), due to the high valuations of its main industries, strong liquidity and cheaper listing costs. In 2016, 70 companies listed on the Kosdaq.
Another development has seen the SGX consider adopting a dual-class share structure in order to enhance its appeal and enable entrepreneurs to expand more quickly. However, this move has been opposed by some fund managers.
It is assumed that the SGX’s partnership with the IMDA is aimed at deepening its sector approach that sees technology among four industries being the focus of its listings strategy. The move comes as startups with Singapore roots, now mature corporates, such as Garena (now SEA Ltd) and Razer head to the Nasdaq or Hong Kong for their initial public offers (IPOs).
The IMDA deal will connect the SGX to the tech ecosystem and enable it to engage with the technology-related enterprises at an earlier stage. It will allow them to work with advisers in the securities industry, investors and company founders. to drive listings.
In March 2017, the SGX entered into agreements with a crowdfunding platform and PricewaterhouseCoopers LLP’s Venture Hub to facilitate capital access for startups.
Recent quarters have seen a number of companies delist from the SGX. While Singapore continues to be an international financial centre, with a stable economic and political environment and a well-developed regulatory and legal infrastructure, its securities market has lagged in development.
The market capitalisation of its stock market has lagged behind economic growth. In 2005, the market capitalisation was 248 per cent of the city-state’s GDP. In 2012, this decreased to 142 per cent of GDP.
The lacklustre securities market of the city-state saw the Singapore Business Federation issue a position paper calling for the government to “drive the churn, bring in more volumes and expand the pool of interested investors in our market” through having the city-state’s pension funds investing in the local stock market.
Stock exchanges in the region such as the Australian Securities Exchange (ASX) enjoy the support of superannuation funds, which offer direct investment options into Australian securities. However, there has been a recent trend of these funds reducing their exposure to Australian equities amid uncertainty about the outlook. Meanwhile, Japan’s public sector is a leading shareholder in about 25 per cent of stocks on the Tokyo Stock Exchange.
Many jurisdictions see pension funds provide strong support to their stock market – though recent global developments have seen some pension funds suffer asset losses – while Singapore’s Central Provident Fund (CPF) monies, with an estimated $211.4 billion in assets under management and managed by GIC, are invested abroad as a matter of policy.
The Singapore Business Federation had said, “The Government should consider separating the CPF component and managing it differently as how pension funds are managed. This will free these funds from the GIC investment restrictions and will likely result in some investments.”
The listing on German fintech firm Ayondo on the Singapore bourse in the middle of this year will also serve as a litmus test for the risk appetite of retail investors in the city-state, who tend to favour longer term dividend plays, as well as the viability of technology firms on the SGX.