S’pore investors take stock risks abroad, but why not at home? SGX chairman Koh Boon Hwee weighs in
Early backers need confidence that an SGX listing will provide an active market for their shares.
Singapore investors are eager to venture into high-risk, high-reward growth stocks overseas, but are reluctant to take similar risks in the local market, claims Singapore Exchange (SGX) chairman Koh Boon Hwee. The issue, according to Koh, is that Singapore has yet to generate sustained demand for local shares, which is necessary to instill investor confidence and maintain market liquidity.
Despite this, younger investors are keen on investing in overseas stocks like Tesla and SpaceX, which are known for their volatile nature. However, they are less inclined to do the same with companies listed on the Singapore Exchange (SGX), as they are well aware of the limitations and constraints in the local market. Many initial public offerings (IPOs) on the local bourse have struggled to gain traction post-listing, despite attempts by the government, stock exchange, and fund managers to revitalize the local equities market.
Koh believes that continued capital injections might be necessary to keep the market afloat, but acknowledges that such injections are more of a "stochastic injection" rather than a steady flow. He differentiated this approach from the regular, sustained capital flows generated by pension systems in other countries, such as the United States, where multiple pension funds make independent investment decisions.
Koh emphasized that while the EQDP funds are being invested rather than spent, the real concern lies in creating a self-sustaining and circular demand flow. Without this, market liquidity will not be established, and there will be no proper valuation. Singapore's venture funding is relatively well-supported, but eventually, investors need a way to unleash their investments and recycle the capital back into other start-ups and ventures.
Listing on a public exchange provides this avenue, but for it to be successful, a robust domestic market is required to attract a diverse pool of investors. Several Singapore-funded companies, like Sea, Grab, and DayOne, have already opted for overseas listings, which has resulted in a gap in the domestic capital cycle. Koh believes that the market needs to create an environment where capital can be recycled, and smaller companies are given the support they need to grow and generate growth in the long run.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
