Upgrading Plans for Local Equities and Equity Derivatives Market

Mr Ong Teng Koon asked the Prime Minister whether there are plans to (i) reinvigorate the local equities and equities derivatives market and (ii) help the Singaporean worker in this sector to stay relevant with technological advances.

My reply will focus on the first part of Mr Ong Teng Koon's question, on plans to re-invigorate the local equity and equity derivatives markets. I have addressed the second part of Mr Ong's question on helping Singaporeans stay relevant amidst technology advances earlier, in my response to Mr Cedric Foo's question.

Let me first summarise where Singapore stands in the competition. We have a leading position as an Asian equity derivatives trading centre, just as we currently do for fixed income and foreign exchange trading. However, Singapore's cash equity market has some structural shortfalls. SGX, MAS and the industry are working to fortify our existing strengths as a financial hub, and putting particular effort into plugging the shortfalls in cash equities.

Let me start very briefly with the equity derivatives market. We are a leading derivatives trading centre in Asia. Singapore-based exchanges offer a wide array of Asian and global derivatives products, including equity, foreign exchange and commodities derivatives1, and with good liquidity in each segment. The compound annual growth rate of trading volumes over the last three years grew by more than 12%. We are working continuously to grow this derivatives ecosystem – by broadening the suite of products, attracting more brokers, market makers and liquidity providers, and attracting investors to Singapore.

However, Singapore's cash equity market does not enjoy the same regional leadership position. While SGX is well regarded as a listing destination for Real Estate Investment Trusts (REITs), and the healthcare, and consumer sectors, it has challenges in other segments.

SGX, MAS and the industry have been working on several initiatives to enhance the attractiveness of Singapore as a listing and trading venue for equities.

First, to grow a pipeline of Initial Public Offerings (IPOs), SGX has attracted market makers and liquidity providers to enhance market liquidity, and admitted new Mainboard issue managers and Catalist sponsors2. These initiatives will take time to bear fruit.

Second, to attract new overseas issuers and investors, SGX has been actively seeking cross-border partnerships and expanding its global footprint. SGX has partnered Tel Aviv Stock Exchange and Nasdaq to boost capital raising opportunities for technology companies. The partnerships have generated a healthy pipeline3 of companies looking to secondary list on SGX.

Third, SGX has introduced the Dual Class Share structure4. This enhances Singapore’s value proposition as a listing destination for new high-growth technology companies. With this additional listing structure, SGX is cultivating a budding pipeline of technology companies that have expressed keenness to tap on this structure for listing on SGX.

Fourth, SGX has started working with private market platforms to build the IPO pipeline. Such platforms can provide growth companies access to a wide network of investors for financing needs just prior to IPO. An example is Capbridge, which has transacted $900 million of private placements and pre-IPO rounds in 2018 and currently has 45 deals in the pipeline.

Fifth, SGX has stepped up its investor outreach efforts in recent years to generate investment ideas and interest. Till date, SGX's initiatives such as the SGX Equities Fund Flow Tracker and MyGateway newsletter, have reached over 270,000 individual retail investors in Singapore and over 1,000 international institutional investors.

Finally, MAS is also supporting capital raising on SGX through various grant initiatives. MAS launched the S$75 million Grant for Equity Market Singapore or GEMS, in February this year, where we co-fund the listing expenses of companies in high-growth and technology sectors. We will also provide grants to widen the research coverage of SGX listed stocks, especially of small and mid-cap companies. Since the grant inception, MAS has approved seven listing grant applications. Research houses tapping on GEMS have committed to hiring close to 50 fresh graduates and experienced research analysts over the next three years.

So, to repeat what I mentioned earlier, we are working on our shortfalls in the cash equity market, while at the same time fortifying our existing strengths such as in equity derivatives.