Yahoo Finance 5 Ways SGX Can Liven Up The Stock Market
The SGX has its focus in many areas, and this could be the reason why the Singapore stock market has been languishing and pretty much monotonous. SGX’s half-year results showed that revenue from its derivatives market was higher than its securities market and that the former grew 1% while the latter decreased by 10%.
In addition, the SGX wears several hats in Singapore. On top of being one the main marketplace for leading listed companies and derivatives in Singapore and South East Asia, it is also a regulator of these companies.
In all, it points to an exchange that could possibly be putting less emphasis on its securities market or stock market. To-date, SGX has seen just four IPOs in 2016, none of which have a market capitalization of over $100 million.
To make matters worse, it seems that the SGX has made it harder to remain listed with a slew of initiatives and tighter regulations that increase costs for companies as well as some unconvincing ideas such as the MTP (Minimum Trading Price) rules.
With the frequent changes on the initiatives and regulations, it is not surprising to know that is it causing foreign companies to hesitate from getting listed in Singapore.
We believe a healthy securities market, with companies from Singapore and other regions will bode better for its long-term sustenance and to attract retail investing in Singapore and South East Asia. With that in mind, we offer 5 ways we think the SGX can liven up the stock market here.
1. Stock Exchange For ASEAN Region
We are not trying to discount the difficulties of positioning the SGX as the gateway into ASEAN. We’re just saying that this would be a great overarching strategy with the fact that Hong Kong and Shanghai have merged and they probably have already cornered the Chinese market.
Being a gateway to the ASEAN region offers a lucrative market for companies in the emerging region with a sizeable population. Clearly, this will be hampered by maturing markets in Indonesia and Philippines and as such, SGX has to work doubly hard to maintain and extend its edge.
2. Take On Appropriate Role
For the SGX to prosper in its business and strategies, it cannot afford to still be the diligent regulator, an active and trustworthy market and an educator. It has to fight the battles that will see it progress. It should definitely speak to MAS about relinquishing majority of its regulatory and some education responsibilities.
By taking on a specific and narrowed focus, the SGX can concentrate on being at the forefront of the securities market.
3. Increase focus on securities market, not just derivatives market
There’s no doubt that the derivatives market has become a vitally important business for SGX. But that’s not to say that it should see it as a natural progression for the exchange.
Instead, the SGX should strive for its securities market to improve. Retail and beginner investors in Singapore and within the region should be the bread and butter business for the exchange as well as improve liquidity in the stock market. This strategy will also ensure the SGX continues to play a leading role in the derivatives market.
A huge derivative market is only beneficial for SGX, not for retail investors in Singapore or the country.
4. Review Regulatory Regime
The recent regulatory regime has been somewhat ramshackle. From burgeoning regulatory costs lamented by the REITs industry to the pull-your-hair-out MTP rule. The SGX has to get its act together and spell out the advantages for the industry.
It has to adopt a balanced but innovative regulatory landscape that will attract companies to list here and minimize costs of keeping in line with regulation for companies. Rules such as quarterly results announcement for smaller companies may not even be required and more innovative listing procedures involving dual class shares should be reviewed. We believe all other aspects of the regulation requirements should be reviewed, including the need for sustainability reports, right down to the need for advertising of Annual General Meetings on newspapers.
If this function is taken out of its hands, it has one less worry and one less battle to fight. More resources can be put to better use in furthering its primary businesses.
5. Lower Transaction Cost For Buying Shares
On the other end of the spectrum, innovation and less expensive means for retail investors to buy stocks has to be pushed. We believe that bank charges are still too expensive and restrict younger investors from getting their hands wet. Many foreign markets offer much better deals for investors to buy stocks, and we believe that the SGX should work with banks to deliver better deals for investors here.
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