Even though Singapore’s Straits Times Index (STI) hit an all-time high recently, crossing 4,000 mark for the first time, it’s still challenging to convince investors in the city-state to invest in companies listed on the Singapore Exchange (SGX).
That’s because investing into the world’s largest companies – mainly in the US – has been so attractive while providing more price action for traders. The case for investing in Singapore stocks also hasn’t been helped by the strong long-term performance of US stock markets over the past 15 years.
However, there have been efforts to try to spur more activity in Singapore’s local market.
The Equities Market Review Group – made up of various government departments, as well as the Monetary Authority of Singapore (MAS), were tasked with exploring ways to strengthen the competitiveness of Singapore’s equities market – last month released a series of measures that are aimed at revitalising the local stock market.
Here are 4 such measures that are aimed at boosting the long-term appeal of SGX as a place to raise capital.
#1 S$5 Billion Equity Market Development Programme (EQDP)
This was the headline initiative which caught investors’ attention. The Equity Market Development Programme (EQDP) will see the MAS invest with selected fund managers that have the capabilities to carry out investment mandates with a strong focus on Singapore stocks.
In other words, it involves the MAS using this fund to invest directly into Singapore stocks via fund managers. MAS went on to clarify that these strategies should be actively managed and invest in a range of companies – not just the STI’s component stocks, comprising the 30 largest and most liquid companies on the SGX.
The aim is to draw in other investors over time and the MAS said it will start the process of evaluating eligible fund managers and strategies over the next few months.
Complementing this, there will also be an expansion of the Research Development Grant Scheme under MAS’ Grant for Equity Market Singapore (GEMS) – meant to build a ready investor base. This will “sharpen focus on mid- and small-cap enterprises, and broaden research dissemination including via new media channels“.
Read Also: Complete Guide To Investing In The Straits Times Index (STI) ETFs In Singapore
#2 Adjustment To Global Investor Programme (GIP)
The Global Investor Programme (GIP), which has been around since 2004 and allows eligible investors to obtain Singaporean PR through specified investments, will also be adjusted to support more capital inflows into Singapore-listed stocks.
Right now, the GIP applicants who invest under the Family Office section have to establish a Single Family Office (SFO) with assets under management (AUM) of at least S$200 million, with at least S$50 million of this being deployed into qualifying investment categories – ranging from listed equities to qualifying debt securities and Singapore-distributed funds.
However, going forward that will now change and any applicants under the Family Office route will have the qualifying investment categories be narrowed down to equities listed on approved Singapore exchanges.
#3 Attractive Tax Incentives
To help improve the environment for listings in Singapore, and to make the SGX a more attractive place to raise capital, tax rebates are also being offered.
There will be a 20% corporate income tax rebate for new primary listings and a 10% tax rebate for new secondary listings (with share issuance) for companies that have operations in Singapore.
The benefit is capped though – at S$6 million per year of assessment for companies with a market cap of at least S$1 billion and S$3 million per year of assessment for companies with a market cap of less than S$1 billion.
Safeguards are in place to ensure the benefit isn’t taken advantage of. For example, companies must remain listed on the SGX for five years and commit to incrementally higher local business spending as well as skilled employment.
The Government will also enhance support for local enterprises, that will provide a potential pipeline of companies for listing.
By doing this, the Equities Market Review Group proposals hope to spur more listings locally and call the Singapore Exchange home for the long term.
Read Also: Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions
#4 Pro-Enterprise Regulatory Stance
A broader approach that the Equities Market Review Group put forward was that of a more pro-enterprise regulatory stance that would involve measures aimed at strengthening investor confidence.
By doing this, the group hopes that Singapore will move decisively towards a more disclosure-based regime while also streamlining Singapore’s listing process to become more efficient.
Some of these measures include consolidating listing suitability and prospectus disclosures review functions in Singapore Exchange Regulation (SGX RegCo). That should help provide prospective issuers with more clarity on the whole listing process and timeline given they’ll only deal with one regulatory body going forward.
Furthermore, there’ll be a streamlined prospectus requirements and listing process. That will make SGX a more appealing place to hopefully raise capital. With the streamlining, capital market issuers can expect a typical listing review process to take in the region of six to eight weeks.
MAS will also look to simplify requirements to permit issuers looking to carry out secondary listings in Singapore by using their primary listing prospectus – with minimal adaptations.
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