On September 16, local time, Singapore's Second Minister of Finance Xu Fangda announced that Singapore is preparing to carry out “bold reforms” to the regulatory structure to revive the sluggish stock market. Xu Fangda is currently presiding over a task force to study ways to strengthen the stock market. He said one area being explored is streamlining initial public offerings (includingSecondary listing) Issuer's prospectus disclosure requirements.

The Singapore Exchange is facing unprecedented challenges due to sluggish trading volume, a decline in the number of IPOs, and a series of delistings in recent years. According to PricewaterhouseCoopers research, the exchange was at a low global level in terms of the number of IPOs and the amount raised last year, with only 7 IPO deals. In the first half of this year, the number of IPOs on the Singapore Exchange was only 1.

Major announcements in Singapore

On September 16, local time, Singapore's Second Minister of Finance Xu Fangda announced that Singapore is preparing to carry out “bold reforms” to the regulatory structure to revive the sluggish stock market.

According to reports, Xu Fangda is currently presiding over a special task force to study ways to strengthen the stock market. He said the group's goals are to abolish outdated rules, encourage high-quality companies to join the listing ranks, and increase liquidity.

Demand from the industry to boost the local stock market is getting louder and louder. The Singapore stock market has always been plagued by poor performance, shrinking market capitalization, and low trading volume. The working group includes representatives from the central bank, Temasek Holdings, Singapore Exchange, and other industry stakeholders.

Xu Fangda said that relevant measures will be implemented in stages before the end of the 12-month evaluation period, which may include reducing listing costs and expanding the variety of stock derivatives.

Xu Fangda said at an event in Singapore on Monday, “Given the global headwinds faced by other exchanges and increased competition in this field, it will not be easy to revive our stock market. But we're ready to make changes and try new ideas. Because if we don't try, our chances of success are zero.”

Xu Fangda said that one area being explored is simplifying prospectus disclosure requirements for initial public offerings (including secondary listings) issuers. Other possible changes include incentives to encourage listing and ways to reduce listing costs, as well as expanding research coverage.

At the beginning of August this year, the Monetary Authority of Singapore announced that it had set up a review team to discuss ways to strengthen the development of the Singapore stock market. The working group will complete the report and propose relevant initiatives within 12 months.

The working group was led by Xu Fangda. The other nine members were Singapore Monetary Authority Director Tse Yuzhen; Temasek Executive Director and CEO Di Lan; Chairman of the Singapore Enterprise Development Authority Lee Chuan-tak; Chairman of the Singapore Economic Development Board, Fang Zhangwen, Permanent Secretary of the Ministry of Finance (Development) Lai Chung-han, Chairman of the Singapore Federation of Commerce and Industry; Parek, partner and head of Tikehau Capital Asia, Australia and New Zealand; and Wu Yujuan, Chairman of the Singapore Management Institute.

The team's mission is to propose a series of specific initiatives over the next 12 months to enhance the competitiveness and vitality of the Singapore stock market.

The review team will focus on two main areas: corporate and market workflows will focus on addressing market challenges, promoting listing, and promoting market revitalization; and regulatory workflows will focus on strengthening regulatory systems to help market growth and build investor confidence. Through these two work processes, the review process will involve stakeholders with expertise and experience in different areas of capital markets, including corporate finance, investment banking, asset management, legal services and corporate governance. The review team will recommend a series of measures to strengthen the Singapore stock market and complete the report within 12 months.

Why did you take action

In fact, judging from the performance of the Singapore Stock Index, the Singapore Straits Times Index (STI), the trend is not weak. On September 13, the Singapore Straits Times Index once rose to 3572.84 points, a new high since June 2018, with a cumulative increase of 10% during the year.

However, due to sluggish trading volume, a decline in the number of IPOs, and a series of delistings in recent years, the Singapore stock market is facing unprecedented challenges.

According to PricewaterhouseCoopers research, the exchange was at a low global level in terms of the number of IPOs and the amount raised last year, with seven transactions and $300 million respectively.

In the first half of this year, the number of IPOs on the Singapore Exchange was limited to 1 company, raising 20 million US dollars. At the same time, 6 Singaporean companies went to the US for IPOs and raised 0.103 billion US dollars.

Notably, the number of delisted companies on the Singapore Exchange is rising. Throughout 2023, more than 20 listed companies were delisted (de-listed), reducing the total number of listed companies on the Singapore Exchange from 651 at the end of 2022 to 632 by the end of 2023.

The Singapore stock market was originally intended to be positioned as a regional capital market in South Asia and Southeast Asia in an attempt to attract IPOs from Indonesia, Malaysia, India, etc., but in recent years, stock markets in other countries in the region have developed very rapidly.

In 2023, the Indonesia Stock Exchange ranked in the top five in terms of the number of initial public offerings (IPOs) in the world; last year, the number of IPOs in India reached 234, the highest since 2017, an increase of 56% over 2022.

A Singapore-based venture capital management partner consulted by the government and Singapore Exchange said, “There is growing concern that even some private capital may leave Singapore and move closer to faster growing markets, particularly India.”

In fact, the Singapore government has taken a series of measures to support corporate listings and stock market development, including cooperating with Temasek to establish cornerstone funds, support IPOs of high-growth companies, introduce new corporate structures and stock categories to facilitate listing, and increase research coverage of listed companies. The purpose of these measures is to attract more high-quality companies to go public in Singapore and create a more dynamic and liquid market environment.

Some analysts pointed out that Singapore should strengthen its regulatory framework to accommodate more innovative corporate structures and financing models. For example, create a new section to tailor rules for high-growth tech companies, similar to the US NASDAQ. This could allow for more flexible listing standards around financial prerequisites and governance, without neglecting safeguards to protect investors.

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