Singapore Stock Exchange Hits 20-Year Low in Listed Companies

The number of companies listed on the Singapore Exchange (SGX) has plummeted to a two-decade low, with only four companies going public this year and several delisting, as reported by the Financial Times. The city-state's regulator is currently investigating ways to stem the tide of the equity market's decline.

October saw the SGX's listed companies dwindle to 617, the lowest count since September 2004. This figure has been steadily declining since reaching a peak of 782 in 2013, as domestic companies increasingly favor overseas listings, particularly in larger, more actively traded markets like the US.

"I surely hope that this year is a low point," says Clifford Lee, head of investment banking at DBS, Southeast Asia's largest lender and Singapore's most valuable public company. "It's a result of various factors coming together."

This trend is exemplified by Shein, the Chinese fast-fashion company based in Singapore since 2022, which is considering a London listing with a potential £50 billion market valuation. Several of Singapore's most prominent businesses, including superapp Grab and e-commerce group Sea, have also opted for New York listings in recent years.

Despite Singapore's success in attracting private capital and fostering a burgeoning family office sector, the SGX has struggled to replicate this growth in initial public offerings (IPOs). The Monetary Authority of Singapore (MAS) launched a review of the country's equity markets over the summer, engaging a panel that includes heads of the SGX, MAS, and Temasek, the state-owned investment company.

This group, due to report its findings next August, has discussed ways to attract more fund managers to invest in the stock market and incentivize more companies to list. This includes considering relaxed disclosure rules and investor safeguards.

"It's a chicken and an egg situation," notes a source involved in the talks. "We have to make it attractive for good companies to list and see more fund managers in the market, and they will only be attracted by the prospect of investing in good companies."

The MAS stated in a statement, "Many ideas have been surfaced as the review group is engaging broadly with many groups of stakeholders and the review group discussions are still ongoing."

Several investment bankers told the Financial Times that 2024 is likely to be the nadir for Singapore listings due to global political uncertainty surrounding elections. They anticipate pent-up demand and are working on several IPOs for next year.

The four companies that went public on the SGX this year, all on the junior Catalist market, had a combined IPO value of just $31 million and included a karaoke bar chain and a Japanese restaurant operator. The largest company to list, the Singapore Institute of Advanced Medicine healthcare group, has shed 71% of its market value since its March IPO following reports of heavy losses. Its auditor, PwC, raised questions about its ability to continue as a going concern over the summer.

While stock markets globally, including London, have struggled to attract listings due to intense competition and high valuations in the US, Southeast Asia has witnessed a significant decline in IPO fundraising this year. This marks the lowest level in at least a decade, according to Dealogic.

Despite this trend, Malaysia has seen 46 IPOs this year, compared to 39 in Indonesia and 28 in Thailand. The Philippines, with only three listings, raised a total of $197 million, significantly exceeding Singapore's $31 million.

Most companies listing in other Southeast Asian markets are domestic, while Singapore positions itself as a global hub for international public companies.

"The strategic infrastructure is here, the liquidity available in the market to invest in new listings is here," says DBS's Lee, who is involved in the MAS review. "Now we need a good supply of companies choosing to list. We have a healthy pipeline for the year ahead. It's like a well-oiled, sleek machine that hasn't been used."

One potential solution often discussed is allowing Singapore's compulsory savings system, the Central Provident Fund, to invest more in the domestic stock market.

"That would create new pools of money to help drive up multiples and would probably spark IPOs," suggests Jayden Vantarakis, head of Southeast Asian equities research at Macquarie, which covers the SGX.

However, Vantarakis doubts that such reforms will materialize and downgraded the SGX from "outperform" to "neutral" in November, partly based on expectations that the MAS review will fail to prevent the decline in listings.