Why SGX is still coming up short

Written by Kapronasia || July 17 2023

In recent years, Singapore’s financial center star has risen so high that the city-state is now commonly referred to as the Switzerland of Asia. It’s an apt comparison, especially considering Singapore’s booming wealth management sector. Yet when it comes to capital markets, Singapore Exchange (SGX) is one of Asia’s weakest performers – and not even close to the Hong Kong Stock Exchange (HKEX). SGX has struggled to attract big-ticket listings despite a push to get tech giants to list closer to home, regulatory changes to attract SPACs and tie-ups with other stock exchanges.

SGX had just 3 IPOs in the first half of 2023 – fewer than some other exchanges had in just one month. The IPO tally was roughly 10% of Hong Kong’s 29 and well below the 45 deals in Indonesia, 16 in Malaysia and 15 in Thailand as well. Total proceeds in each of those markets exceeded US$500 million.  

The choice of prominent Singaporean startups to list overseas illustrates SGX's woes. The two most prominent Singaporean tech startups of the past five years, Grab and Sea Group, both went public in the U.S. – the former on the Nasdaq and the latter on the NYSE. It was a no-brainer for them: Grab and Sea had access to a far larger variety of investors in the U.S. than back home, and in Grab's case, the Nasdaq was better suited for a SPAC. 

Ernst & Young notes that Singapore has many large market-cap companies majority owned by its sovereign wealth funds, making it more difficult for SMEs to attract investors’ attention.

Not auguring well for SGX is the fact that an increasing number of companies are delisting. Dealogic notes that 10 companies delisted in the city-state in the first of the year, compared to eight in the first six months of 2022. Overall Singapore-listed companies fell to 643 in May 2023 from 665 in May 2022. The delistings occurred for various reasons, including companies’ frustration with the exchange’s lack of liquidity, poor performance and accounting or corporate governance scandals.

An SGX spokesperson told Nikkei Asia that “many positive and active conversations with potential IPO aspirants are ongoing. We anticipate some of these companies may list when market conditions are more favorable."

It is certainly possible, and we think that dual listings with NYSE – an agreement reached last year – could potentially attract some interesting companies, especially as Singapore is working to make itself a green finance hub. Focusing on ESG investments could be a good strategy for SGX as no other exchange in Asia has yet carved out that niche. NYSE President Lynne Martin said a statement that the tie-up between the two exchanges “will drive the development of new products in high-demand areas such as ESG.”

Meanwhile, Singpaore has an interesting collaboration with India that has allowed the India National Stock Exchange’s (NSE) Nifty index to trade on SGX as Nifty, with a turnover of close to US$4 billion a day in 2022. This month, it moved to GIFT City, India’s first International Financial Services Centre (IFSC), in Gandhinagar. The shift of the exchange to India inaugurates the full-scale operations of NSE IFSC-SGX Connect, a planned collaboration between SGX and NSE for trading stock index-based products.