The wait has been worth it.
In August last year, the Monetary Authority of Singapore (MAS) announced the formation of a review group to recommend measures to strengthen equities market development in Singapore.
This group, Equities Market Review Group (EMRG), was chaired by the Minister for Transport and Second Minister for Finance Chee Hong Tat, and will comprise private sector stakeholders and public sector representatives.
Last Friday, the EMRG unveiled its first set of measures after conducting extensive consultations with industry stakeholders.
These measures aim to stoke investor demand and improve the attractiveness of the local bourse for initial public offerings (IPOs).
We discuss these measures and highlight four Singapore stocks that look set to benefit.
First off, MAS and the Financial Sector Development Fund will launch a S$5 billion Equity Market Development Programme (EQDP) where MAS partners with select fund managers with investment mandates that focus on Singapore stocks.
These should be actively managed strategies and invest not just in blue-chip stocks but a wider range of companies.
These fund managers will also enjoy tax exemptions on qualifying income from funds that invest substantially in Singapore-listed equities.
The Global Investor Programme (GIP) will also be tweaked to attract more capital inflows into Singapore-listed equities.
GIP stipulates that single-family offices have to be established with assets under management (AUM) of at least S$200 million, of which S$50 million should be invested in equities listed on the Singapore Exchange (SGX: S68), or SGX.
Apart from boosting demand, MAS also came up with incentives to attract companies to list on SGX.
There will be a 20% corporate income tax rebate for new primary listings and a 10% tax rebate for secondary listings, both of which should help to defray costs for enterprises.
For new fund manager listings in Singapore, there will be an enhanced 5% concessionary tax rate on qualifying income but these funds should distribute a portion of its profits as dividends.
The next step involves strengthening investor confidence to encourage more investors to park their money in Singapore equities.
Listing suitable and prospectus disclosures will be consolidated under SGX Regulation (SGX RegCo) to provide prospective issuers with a clearer timeline for the listing process.
Prospectus requirements will also be streamlined and SGX RegCo’s qualitative criteria for listings will be reviewed to simplify the requirements.
The streamlining means that IPOs will take six to eight weeks but will provide prospective issuers with clearer guidelines and timelines.
Remember that the above constitutes just the initial set of measures by the EMRG.
The group will consider other proposals that include the introduction of programmes to increase companies’ shareholder engagement capabilities.
It is also looking at potentially reducing board lot sizes to attract higher retail liquidity.
Other measures may include the improvement of post-trade custody efficiency along with the development of cross-border partnerships.
These proposals should be ready before the end of 2025.
The EMRG has come up with a comprehensive set of measures targeted at addressing both the demand and supply side.
The S$5 billion EQDP should help to attract higher inflows into Singapore, thereby benefitting banks such as DBS Group (SGX: D05).
For 2024, DBS’s wealth management AUM increased by 17% year on year to a record S$426 billion.
Higher inflows should further increase this AUM and allow the lender to record higher non-interest income from wealth management activities.
Similarly, these increased inflows should benefit iFAST Corporation Limited (SGX: AIY).
The financial technology company saw its assets under administration (AUA) jump 26.2% year on year to a record S$25.01 billion as of 31 December 2024.
Net inflows for 2024 amounted to S$3.3 billion.
The EQDP may enhance iFAST’s inflows and result in the group reporting continued increases in its AUA.
As for SGX, higher trading liquidity will increase trading volumes, thereby benefitting the bourse operator.
For the first half of fiscal 2025, SGX saw a 27.5% year-on-year increase in volumes for exchange-traded currencies and commodities.
Its equity derivatives volume climbed 17.4% year on year to 91.2 million contracts but the total traded volume for the equities market dipped by around 2% year on year.
Listings amounted to just five which raised a measly S$19.7 million.
Should these measures have their intended effect, SGX could see volumes surge while the number of listings should shoot up.
As trading volumes increase, UOB Kay Hian (SGX: U10) will also benefit from higher revenues generated by trading commissions and fees.
This first set of measures by MAS provides hope that the local bourse can enjoy a revival.
What the exchange sorely needs is a confidence boost to attract more listing aspirants to float their shares in Singapore.
Should these businesses choose to list in Singapore, it will kick off a virtuous cycle where liquidity attracts more liquidity and leads to higher valuations.
With higher valuations, more companies will be attracted to raise money on SGX, thereby further improving liquidity.
It’s still early days, and investors are eagerly awaiting the next set of measures, but MAS may be headed in the right direction in solving the SGX’s woes.
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