MORE BOLDNESS REQUIRED
Speaking to market insiders, one also comes away with the impression that the SGX’s regulatory regime, while acknowledged to be amongst the best in the world, is somewhat burdensome for smaller companies. Companies with thin or volatile margins will find it difficult to cope with the high compliance costs, and may ultimately head for the door. More so if their stocks attract scant interest in the market.
So what is the solution?
While the EMRG’s initiatives appear to be a step in the right direction, some industry observers argue that more could be done to support an illiquid bourse. While S$5 billion is a good start for injecting liquidity into the market, it is worth considering if government-backed funds like GIC should also invest in SGX-listed stocks.
As I have said before in my prior columns on this subject, if the SGX succeeds in attracting regional companies to list here, it makes sense for the GIC to invest in them, particularly when it does so on other exchanges like Hong Kong. Such an approach could further increase the appeal of the SGX as a listing destination.
There have also been some suggestions that restrictions on short selling and margin trading be eased to support liquidity. Properly regulated and confined to “accredited investors” who have undergone some form of training or attended a requisite course, this could bring back the animal spirits necessary to fire up liquidity in the market. The Securities Investors Association (Singapore), or SIAS, could undertake such a programme and certification.
There are many ways to skin the cat but there is no single solution to the problem.
The issues of liquidity, delistings and the lack of new IPOs is a serious concern for a market situated at the heart of one of Asia’s premier financial and wealth management centres. But this is not an insurmountable problem. It just requires serious workable solutions which address core issues.
Half-hearted and piecemeal measures may not be enough. The criticism now is that the EMRG’s initiatives are too few, too late and not comprehensive enough to provide a big bang solution for a very sickly market. More boldness is required.
Ven Sreenivasan is a former editor and journalist who has covered financial markets, economic and corporate news and aviation for over more than 30 years.
