SGX panned as a place to raise funds in 2015
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Association which says it represents nearly 30 listed firms urges Singapore businesses to consider markets abroad
Kenneth Lim
09 January 2015
An advocacy group has suggested that businesses consider overseas markets and non-equity funding to raise capital, as it expects a lacklustre 2015 for the Singapore stock market.
The Small and Middle Capitalisation Companies Association (SMCCA), which says it has a membership of almost 30 listed companies, issued a report on Thursday stating its outlook for a weak 2015 market.
Citing non-oil export and industrial production data, it said it expects the Singapore economy to “weaken further” this year and drag on the stock market.
It observed that the declining trading activity as a percentage of market capitalisation in Singapore was worse than in rival exchanges such as Hong Kong, and that the “decreasing trend of total offer size and average offer size of equity IPOs” was a concern.
Asked about this, SMCCA president Tan Choon Wee clarified: “Our concern is not the lower average offer size, but that while there are claims that IPO numbers are up, the total amount raised by all these IPOs is not.”
Singapore Exchange (SGX) executive vice-president Chew Sutat replied that the numbers actually reflected a robust Catalist board:
“Business trusts and Reits have been well-received by investors. The average size of equity IPOs has come down and this follows the success we’ve had with Catalist listings, which have come both from SMEs that are homegrown as well as regional.”
SMCCA said it expects increased competition in the year ahead for “conventional fund raising” - defined as equity capital raising - as SGX “tries to increase number of listed companies without improving trading activities”. SMCCA also called for a “catalyst” to revitalise the stock market. In short, SGX needed to focus on creating excitement instead of coming up with more regulations, said Mr Tan:
“Excitement is not in more regulation or more education. It is in allowing market participants to explore innovations and opportunities. New regulations just introduce uncertainties. Policing and prosecuting should be the regulator’s job; telling investors how to invest and listed companies how to run their business is not.”
In response, Mr Chew argued that the market operator’s numerous outreach initiatives had raised turnover year-on-year in November and December, and that the coming rule changes will help, too.
“The board-lot size reduction on Jan 19 will help new and existing investors who have not been active to return to the market with sustainable trading and investing, and not only short-term speculative trading,” he said.
Recommending that companies seeking to raise capital this year consider overseas exchanges, Mr Tan said: “Given the current trading liquidity situation in Singapore, the more attractive overseas ones will be those which can offer better trading liquidity and vibrancy - markets such as Hong Kong, Malaysia and the UK are potentially attractive markets.
Listed companies can either do a secondary listing or spin off part of their business for a separate listing overseas, suggests the SMCCA, which said its network of expert partners can advise and help its members with these corporate exercises.
SGX’s Mr Chew pointed out that the primary market capitalisation growth of 27 per cent in the Singapore market from the end of 2009 to 2014 outpaced Hong Kong’s 26 per cent and Japan’s 24 per cent in Singapore dollar terms.
Overseas companies are also finding Singapore an attractive place to raise money.
“Market capitalisation statistics show growth in the market. We continue to benefit from our position as the earliest exchange to start driving international listings; a good proportion of the 41 listings last year were from overseas.”