As a result, the Singapore market has remained the most moribund in the region as liquidity dried up, price discovery evaporated, valuations hit the floor and new listings disappeared.
Meanwhile, delistings have become common.
So could the proposed measures announced on Thursday evening change all this?
It is too early to say. That said, it is a step in the right direction to rejuvenate this market. But much more needs to be done.
THE TOWN SHERIFF
While the proposals include a gamut of initiatives, including changes in qualitative and quantitative listing criteria, the most effective initiatives could be the scrapping of the financial “Watch-List” and the adoption of a more targeted approach in post-listing queries.
The much-disliked Watch-List – a “penitentiary” for companies with multi-year losses and falling market capitalisation – effectively sidelined these corporations. In the process, it killed business confidence and made it near impossible for these companies to raise capital.
Meanwhile, the severe and open-ended SGX RegCo queries – often about perceived unusual stock price movements – caused nervousness and alarm in the broader market. Some have likened this approach to a town sheriff in a spaghetti Western who charges into a saloon, guns drawn, causing panic-stricken patrons to dive for cover, when in fact there is only one crook slinking in the far corner of the bar.
So how will all this impact the Singapore bourse?
In reality, SGX RegCo’s proposals dovetail with one of the recommendations announced by the Monetary Authority of Singapore’s (MAS) Equities Market Review Group in February. In particular, it plays to the S$5 billion Equity Market Development Programme unveiled by the review group.
This scheme envisages fund managers and accredited institutional investors deploying this money into small- and mid-caps which are not on any index. The same fund managers are then expected to monitor the companies into which they invest.
In short, some aspects of the market oversight and protection will now move to the realm of the investor, although SGX RegCo will retain backstop surveillance and enforcement functions.
