Some thoughts on SGX listings

A recent Straits Times article lamented the moribund state of the SGX where stock market trading is waning. Among the causes cited:

- overly prohibitive regulations. Some Catalist firms are reluctant to undertake corporate actions due to SGX's compliance and disclosure requirements. The example cited was about queries from the SGX on sudden share price movements, being bad for their reputations

- overly restrictive Sponsors

- Minimum Trading Price rules which require Mainboard companies to maintain an average share price of at least 20 cents for 6 months to curb speculation. Some firms merge shares to get around this, resulting in fewer shares available (this was abolished in 2020)

- lack of variety as SGX is widely dominated by REITs and banks. The SGX needs a larger and more diversified mix of active investors and issuers. Investors in Singapore like dividends and stability, preferring blue-chips

This has resulted in a shrinking stock market, prized listings (such as Grab, Sea and Razer) going elsewhere and more companies delisting.

All these are not new, the same worries were raised multiple times over the years. This article from 2019 lists the same concerns, namely an overly cautious mindset among investors who favour dividend payers, dearth of IPOs and so on.

We are not alone

It may help to know that we are not the only ones wringing our hands over the state of the domestic stock market. The English have been doing the same in the last few years. Just recently, the decision of ARM to list in the US instead of it's "home" stock exchange prompted another round of soul searching

Every country is different but among the signs listed pointing to a (supposedly) sorry state of the London Stock Exchange (LSE) are UK companies deciding to delist and list elsewhere, desirable companies like ARM choosing to list in the US and a dearth of IPOs. Also common are worries about the dominance of old and stodgy in the index, and not enough tech companies. Sound familiar?

Just like the symptoms, the alleged causes are the same, Namely stifling regulation, overly conservative investors who prefer dividends and lack of liquidity. Ironically, the article mentioned Singapore as an example of a country which is not affected by our own IPO famine, so the UK should not be overly concerned.

Is this a problem?

I'm not making light of these concerns, for Singapore and the UK. Not being an expert, I am not sure how big of a problem this is. It is probably a big concern for SGX shareholders and for those using the domestic stock market as a gauge of the health of the economy. 

The Straits Times article contained a response from the SGX, pointing out that it took decades for the SGX to host 42 REITs, so maybe we need more time for local tech companies to mature and come to market.

As a personal investor who favours stock picking, I am glad that the internet and globalization has opened up overseas stock trading to a retail guy like me. The SGX is where I look for solid REITs, the US for global heavyweights like the MAANGs (Meta, Apple, Amazon, Netflix and Google), the UK for niche players like Games Workshop.

It is also important that good rules and regulations not be stripped away, just to attract all sorts of listings. Retail investors need good regulations to ensure good governance. 

When I look at SGX listed REITs, I do so with some comfort that MAS regulations forbid leverage above 50%, and trust that they are competent and professional enough to enforce it.

Otherwise we are all sheep for the wolves to slaughter. We have had a glimpse of what it looks like when companies treat regulators and regulations lightly.

Maybe it is ok that local bourses do not have all the hottest stocks. What is more important is that it hosts solid well-run companies. 

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