Encouraging Locally Incorporated Tech Companies to Choose Singapore Exchange over Foreign Stock Markets for IPOs

Mr Speaker, I will address the questions by Ms He Ting Ru in today’s Order Paper as well as the written Parliamentary Question filed by Mr Desmond Choo for yesterday’s Sitting as they pertain to initiatives in progress to strengthen the attractiveness of Singapore’s equity markets.

The challenge of sustaining a vibrant and attractive cash equities market is not unique to Singapore. Globally, the number of initial public offerings (IPOs) and proceeds raised has been declining since 2021. This was driven by the trend of companies staying private for longer and, more recently, against the backdrop of a challenging global macro-environment and interest rate environment. In the first half of 2023, global IPO proceeds fell by 36%, while Asia Pacific IPO proceeds were down by 40%.

Many stock exchanges are also dealing with the trend of local companies looking to list on large overseas markets like the United States (US). For instance, the United Kingdom (UK)’s largest chip design firm ARM Holdings recently listed in the US. Israel has a vibrant startup ecosystem. Yet, many of its companies list in the US due to its deep and liquid capital market and investor base. Nearer to home, Hong Kong is also looking to retain and attract more IPOs amidst the more challenging macro-economic environment.

Against this backdrop, we have shared in this House, most recently in November 2022, the initiatives that Government agencies and the Singapore Exchange (SGX) have established in recent years to support the attractiveness of our equities market. We have set up the S$1.5 billion Anchor Fund @ 65, which is a co-investment fund by the Government and Temasek, and the S$500 million EDBI Growth IPO Fund, to invest in high-growth enterprises at the late stage or at IPO. The Monetary Authority of Singapore (MAS) has enhanced its grant scheme to defray listing costs and develop Singapore’s equity research ecosystem.

SGX has also been actively seeking cross-border partnerships with the regional exchanges to enhance its attractiveness as a gateway for Singapore companies and international investors to access regional capital markets and opportunities. In May this year, to expand access and connectivity to regional capital markets, SGX launched a Thailand-Singapore Depository Receipt or DR Connect, to broaden access to capital and to markets.

Overall, our initiatives aim to provide a more enabling environment for companies to consider listing on SGX.

At the same time, Mr Speaker, Sir, we recognise that there are limits to how these measures can directly influence listing decisions. Companies considering possible public listings have several commercial objectives in mind. In some cases, these considerations may prompt them to explore listing venues outside of Singapore. First, they may decide to list in jurisdictions where they can secure the best valuations for their shareholders. For quite a number of companies, a US listing is attractive due to the US’ deeper pool of investors and liquidity. Second, companies may list in jurisdictions that give them better exposure to their own target markets. For example, a company planning to expand its business in China may choose to list in either Hong Kong or China, or both.

If we take an overly prescriptive approach by making Government support to promising startups conditional on a local listing, we may end up imposing a rule that may be at odds with the growth plans of the company or the founder. Similarly, global investors who are in Singapore will ultimately determine how to allocate their capital based on their strategies and how they view the market. So, again, if we prescribe that they must invest certain amounts in only locally listed companies, we will effectively constrain their investment mandates and end up losing a larger pool of investors who adopt a regional or a global view.

Let me next respond to Mr Desmond Choo’s question on SGX’s role in helping small and medium enterprises (SMEs) raise capital from overseas markets. One way is to make sure we have good sources of SME financing available to meet our SMEs' needs. And apart from a well-developed banking system that provides a range of financing options for our SMEs, SGX has Catalist, a second board that caters to the fundraising needs of growth-stage companies or enterprises and currently has over 200 SMEs listed on it.

In addition, MAS has a grant scheme which defrays listing costs for issuers listing on Catalist. In 2021, MAS increased the grant cap under this scheme from S$200,000 to S$300,000, to further help SMEs who choose to list on Catalist, to alleviate their listing costs.

Apart from accessing public markets, private equity and venture capital, or PE/VC in short, have in recent years been an increasingly important source of growth capital for promising startups. More PE/VC managers have established their presence in Singapore and are coming in at earlier stages, which broadens the range of financing for our startups.

MAS recognises the value of an attractive equities market as part of our overall financial services ecosystem. That is why the Government and SGX have in place a range of initiatives to better position our equities market. We will continue to monitor the situation closely and review and update our measures, where necessary, to adapt to the shifts in global capital markets.

Mr Speaker, I thank the Minister of State for the reply. I have a couple of supplementary questions.

First, I do not think the question was asking for the grants to be conditional upon making these firms list in Singapore on SGX or Catalist, as appropriate. Rather, it was just to get a sense of how many of these firms are receiving grants or support from the various agencies and how many of them eventually decide to exit via an IPO strategy and then, subsequently, decide upon careful consideration that they want to list elsewhere, as the Minister of State shared in his reply.

And does MAS then track the reasons why and what are the tensions between having a tech firm or just any startup decide to base themselves in Singapore, avail themselves of our grants and then, subsequently say, "Oh, actually, we rather have access to funds elsewhere" or "we rather try to access the capital markets elsewhere"?

So, I think having MAS to actually understand these tensions and the reasons why it is a good idea to be here but not a good idea to raise funds here and whether or not MAS does any studies to find out. Once you find out the reasons why, it will eventually become easier to amend or to support our regulatory environment and regime to address some of the concerns that these startups will have, with the ultimate aim of making our SGX and our equities and capital market regime here in Singapore more active and, of course, deepen that pool in the market here.

A related supplementary question is: does SGX and various agencies track the number of locally incorporated and home-grown tech startups which eventually, on a yearly basis, decide to list and go for an IPO here in Singapore? If so, can the Minister of State share the data?

I thank Ms He Ting Ru for her supplementary questions. I think her idea is to help and we are all aligned if we want to enhance our equities market.

To the first question, we do not collect that data. That is the simple answer to the question. As I mentioned earlier on in my reply, we are doing all that we can to help to boost the equities market, but there is also a limit. Because, ultimately, firms will have major commercial considerations, including valuations, including market, as well as including whether they can secure the best kinds of valuations elsewhere as well as whether they want to list in the market where they are closer to the particular target market.

So, I think that is the question. If you ask any of the companies or firms, they will tell you that it is primarily a commercial decision. Of course, we will do what we can. But, ultimately, it is a commercial decision.

On a broader perspective, I would like to share with the House also that in line with our Industry Transformation Map 2025, particularly on the financial sector, we are constantly looking at ways in which to enhance and deepen our financial sector. The financial sector is not focused on just having an equities market. We have a very vibrant foreign exchange market, we have a very vibrant wealth management market, we are into green finance, we are into fintech and others also. So, it is a dynamic, deep and also very diversified financial market.

Mr Speaker, firstly, I would like to declare my interest as somebody working in a financial institution.

Just two supplementary questions for the Minister of State. I understand the Minister of State's point about it being a commercial decision for private companies to choose where they want to list. But I was just wondering: what is the Government's position, as to a ruling, such as that in Indonesia, whereby I believe the local companies can seek a dual listing, but they must also list on the local exchange?

The second supplementary question is: on top of listings, there is also the broader issue of delisting in the local market. And it is something which has been a challenge for the last couple of years, where the number of delistings has been more than the listings. As a result, there are concerns as to whether or not this issue of perceived weaker valuations and lower liquidity could continue to result in a bit of downward spiral. So, just wondering in terms of the delisting part, what is the Government's approach towards addressing some of these issues?

I thank Mr Louis Chua for his supplementary questions. I will try to answer the second question first, which is regarding our delisting. Since 2014, there has been a trend where the number of delistings has surpassed the number of IPOs. As of April 2023, the total number of listed companies on SGX stood at 650.

As I mentioned in my main reply, there are a variety of different reasons why companies would list on a particular exchange, and also a variety of reasons why they would delist. That is based upon maybe how they view the market, whether they want to list overseas, or they look at prevailing options. It could be different funding sources. They might want to go back to private, for example. So, there is a whole different variety of why they would want to do so. As I mentioned earlier on also, I think it is important for us to try to play a part but there is also a limit to what we can do to encourage listings.

I do not have an answer, but I think the short answer to the Member's first question is that we just take a very different approach to Indonesia's.