MAS moves to attract listings, boost equity research talent

The Monetary Authority of Singapore (MAS) on Monday unveiled a S$75 million initiative to help boost equities research and enhance Singapore's status as a hub for equity listings.

Announcing the initiative, called the Grant for Equity Market Singapore (GEMS), Finance Minister and MAS board member Heng Swee Keat said the grant would further Singapore's vision to serve as Asia's centre for capital raising and enterprise financing.

GEMS comprises co-funding for listing costs of companies, with particular focus on the "new technologies" sector. It will also co-fund the salaries of equity research hires by 50 to 70 per cent.

Securities firms welcomed the support. Luke Lim, Phillip Securities managing director, said the firm is looking to hire more researchers with MAS's support. "While the benefits of the initiative may not be seen immediately, over time, we should see improved quality of coverage of companies for investors. Training analysts to provide good research on quality companies that pay good dividends and have sustainable business models is not an easy task. For fresh graduates, it also requires mentoring and substantial investment."

GEMS is the latest in MAS's efforts to boost Singapore's ecosystem for enterprise financing across a spectrum of company life stages. For companies in the early growth and expansion stages, there is a deal-making platform MATCH, and a programme to place up to S$5 billion with private equity and infrastructure fund managers.

GEMS has three components. One is a listing grant to facilitate listings on the SGX by co-funding initial public offering costs.

In this respect, the most generous funding is for enterprises in the "new technology" sector with a market capitalisation of at least S$300 million. This sector includes companies in financial technologies, consumer digital technologies and on-demand services such as gaming services and peripherals. GEMS will co-fund 70 per cent of eligible listing expenses capped at S$1 million.

For enterprises in "high-growth" sectors with a market capitalisation of at least S$300 million, GEMS will co-fund 20 per cent of listing expenses, capped at S$500,000. This sector includes advanced manufacturing, hub services, logistics and healthcare.

For enterprises from all other sectors, GEMS will co-fund 20 per cent of listing expenses, capped at S$200,000. No minimum market cap is needed. The grant does not apply to Reits and business trusts.

Carmen Lee, OCBC Investment Research head, said the scheme would be a catalyst for companies to list in Singapore. "While the Singapore market is recognised as being well represented by Reits here, there are comparatively fewer high-growth or technology companies."

DBS Bank head of capital markets Eng-Kwok Seat Moey said: "While the grant amount may not make a significant difference to larger-cap issuers raising large-sized IPOs, it will be attractive to the small- to mid-cap companies raising smaller amounts and where IPO expenses can form a significant percentage of the proceeds raised."

The second component of GEMS is support for research talent development. GEMS will co-fund 70 per cent of the salaries of Singaporean fresh graduates hired as equity research analysts for two years. For re-employed experienced analysts (Singaporeans and PRs), it will co-fund 50 per cent of salaries for one year.

Third, MAS will also earmark funds to crowdsource initiatives that will help drive the development of Singapore's equity research ecosystem. Such initiatives include the publication of industry or sector primers and innovative ways to distribute research.

David Gerald, Securities Investors Association of Singapore president, said the grant scheme will give SME research a shot in the arm. "Equity research coverage of small and mid caps is urgently needed to provide guidance and to bring out the gems that are now languishing without coverage ... With more information and research, investors will be able to make better-informed investment decisions and this leads to better liquidity. Hopefully, this will trigger a virtuous cycle of more coverage as investor interest grows," he said.

Credit Suisse head of Singapore research Gerald Wong said the grant complements the firm's strategy to develop junior research talent. It has hired two fresh graduates over the past year. "We will be looking out for details on which candidates will be eligible for the grant, potential co-funding caps, as well as related conditions for coverage of mid- and small-cap enterprises ... these initiatives signal that the equity markets remain a key area of focus."

DBS Vickers chief executive Lim Kok Ann said two factors globally have dampened interest in small- and mid-caps. One is the surge in passive investments which has reduced activity in non-index stocks. The second is MiFID II regulations in Europe which have resulted in significant cuts in research budgets.

"An increase in research coverage of non-index stocks should help investors identify promising growth companies early and give more opportunities for investors to invest profitably. With more exposure to investors, deserving mid-cap stocks should see improvements in their valuations. In turn, this should increase interest among business owners to list on the SGX."

Carol Fong, group chief executive of CGS-CIMB Securities, expects the scheme to help expand investors' options and enhance liquidity. "There are many considerations when a company chooses a market for listing, such as the sector specialisation of the market, ease and cost of listing and liquidity. The initiative would help to address some of these considerations." The firm has set up a business unit to help companies in fundraising and placements.

Genevieve Cua

15 January 2019