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Straits Times
26-05-2025
- Business
- Straits Times
MAS-led review group needs to speed up efforts amid flurry of delistings and dearth of IPOs
News analysis MAS-led review group needs to speed up efforts amid flurry of delistings and dearth of IPOs SINGAPORE – Speed and coordination are of the essence as a review group set up to help strengthen Singapore's stock market makes some headway. Formed in August 2024, the review group will continue to be helmed by Mr Chee Hong Tat, who is now Minister for National Development in Singapore's new Cabinet , after relinquishing his previous roles as Minister for Transport and Second Minister for Finance. In a May 21 Facebook post, Mr Chee also said he will remain as deputy chairman of the Monetary Authority of Singapore (MAS) to support Deputy Prime Minister and MAS chairman Gan Kim Yong, and will continue to work closely with the central bank and tripartite partners to grow Singapore's financial sector. This helps to provide continuity in the tough task ahead as there is some urgency in reviving the local stock market, which is struggling with a sharp decline in initial public offerings and a fast-growing number of delistings. Competition from other exchanges in the US and Hong Kong has also intensified, with some Singapore-based companies opting to list there instead. To be sure, initial measures introduced by the review group in February have made progress: A programme to allocate $5 billion in seed capital to Singapore-based funds for investing in local stocks has received positive interest, with suitable fund managers to be shortlisted by end-September, MAS told The Straits Times. Meanwhile, tax incentives have been rolled out, and public consultations on proposed changes to listing rules and securities regulations are under way to simplify disclosure requirements for companies intending to pursue IPOs. Trading activity on the Singapore Exchange (SGX) has improved, with almost 29.5 billion shares worth around $41 billion traded in April, up from around 26.8 billion shares valued at $29.6 billion traded in March, according to the exchange. Still, progress updates on some of the other measures announced in February are still in the works. These include equity investments through a global investors programme that allows eligible foreign investors to obtain permanent residency in Singapore in exchange for substantial investments. First introduced by the Economic Development Board (EDB) as one of the investment options under the programme in March 2020, the family office option is intended to draw family office principals to invest in Singapore. The requirements included having a Singapore-based single family office (SFO) with minimum assets under management (AUM) of $200 million, of which at least $50 million must be deployed into selected investment categories here. According to the EDB, as at end-2024, it had approved 40 applicants under this option. Since the review group's first measures were announced in February, new family office applicants with $200 million in AUM applying under this option have been required to invest $50 million in Singapore-listed equities only. However, ST was unable to get further data on how much has been deployed into Singapore equities since then. An EDB spokesperson noted though, that SFOs under the programme 'constitute only a small segment of the broader family office ecosystem in Singapore'. Still, a May 23 UBS family office report noted that family offices globally are showing more interest in the stock markets. 'Developed market equities, such as SGX stocks, are the favoured asset class for family offices globally and in the Asia-Pacific (Apac) for the next five years,' said Mr L. H. Koh , head of UBS global family and institutional wealth in Apac. The review group is also expected to announce the expansion of an existing research grant scheme to broaden analyst coverage of mid- and small-cap stocks and research dissemination through new media channels. This is expected to support more informed decisions among investors, even as disclosure requirements for issuers are eased. As at November 2024, the research grant had added 14 research firms and supported more than 1,100 research reports covering over 170 SGX-listed companies, MAS said. When asked if any investor protection measures, particularly for minority investors, are also being considered as Singapore moves towards a disclosure-based system to encourage more listings, an MAS spokesperson noted that the review group has recommended adopting a more pro-enterprise regulatory stance alongside measures to strengthen investor confidence. 'MAS will be studying ways to strengthen investor protection through enhancing investor recourse avenues.' On this front, market watchers have suggested setting up an institution to financially assist retail investors who are victims of market misconduct, fraud or scams in instituting class actions against, and to recover damages from, errant persons or companies that are responsible for losses suffered. These avenues, along with introducing programmes to uplift listed companies' shareholder engagement capabilities and attracting retail liquidity through reducing board lot sizes, are among a second set of measures expected by the end of 2025. Analysts at Morgan Stanley noted in a May 22 report that the second set of measures could include initiatives to improve corporate value, governance, and capital efficiency – similar to those introduced in Japan and South Korea - which they believe could significantly boost investor interest. 'With multiple potential catalysts ahead, valuations are likely to edge even higher,' they said. Whatever the case, for the stock market to be liquid and successful, all revival measures – including those aimed at restoring confidence and trust – must be well-coordinated and executed in tandem to be effective. Timely implementation is critical to ensure the Singapore market remains relevant. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
18-05-2025
- Business
- Business Times
MAS, SGX RegCo propose listing rule changes in pursuit of a vibrant, disclosure-based market
[SINGAPORE] Here's how Warren Buffett described the purpose of his annual letter to shareholders of Berkshire Hathaway earlier this year: 'As a public company, we are required to periodically tell you many specific facts and figures,' said the billionaire chairman and chief executive of Berkshire. 'In addition to the mandated data, we believe we owe you additional commentary about what you own and how we think. Our goal is to communicate with you in a manner that we would wish you to use if our positions were reversed – that is, if you were Berkshire's CEO while I and my family were passive investors, trusting you with our savings.' Berkshire has garnered a global investor following by delivering strong returns over a long period of time. Buffett's clear and consistent communication of Berkshire's objectives and its performance – on top of the disclosures it is legally required to make – have also undoubtedly helped build up the market's trust and confidence in the company. This past week, the Monetary Authority of Singapore (MAS) and Singapore Exchange Regulation (SGX RegCo) launched public consultations on a number of proposals to better foster a disclosure-based regime, and make it easier for companies to list in the local market. MAS is proposing to streamline prospectus disclosure requirements for primary listings in order to allow issuers more latitude in providing material information, and to make it possible for issuers seeking secondary listings in Singapore to prepare their prospectuses based on disclosure documents lodged in their home markets, with minimal adaptation. MAS is also proposing to allow issuers more flexibility and scope for engaging investors as they make their way through the initial public offering (IPO) process. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Meanwhile, SGX RegCo is proposing to ease a number of criteria for listing applicants – for instance, by requiring them to simply disclose any material weaknesses of internal controls and steps taken to address them, instead of having to confirm the non-materiality of those weaknesses. It is also proposing to do away with the Financial Watch-list; and adopt a more judicious use of public queries so as not to unnecessarily alarm the market. These proposals are among the slew of recommendations made in February by the MAS-led equities market review group. Other initiatives announced at the time were that MAS will allocate S$5 billion to fund managers investing in the local market. The review group also said that it is studying initiatives to encourage companies to focus on shareholder value, and better enable investors to seek recourse and recompense for losses due to market misconduct. The MAS review group's big vision seems to be that institutional investors will play a key stewardship role in the Singapore market, engaging with companies and pushing them to lift their standards. Combined with more streamlined listing rules, this could create a more conducive environment for promising new listings. Investors need to be alert Are less-prescriptive listing standards really the appropriate remedy for the Singapore market now? Could the proposals just end up facilitating the entry of low-quality issuers? Some market watchers pointed out last week that companies seeking secondary listings in Singapore might be subject to disclosure requirements in their home market that do not sit well with local investors. Notably, DFI Retail Group made headlines in March for not announcing via SGX the sale of its Cold Storage and Giant stores in Singapore for S$125 million. The company – which has a primary listing in London and secondary listings in Bermuda and Singapore – only made a press statement about the deal. DFI's explanation was that the listing rules in the UK did not require it to make a regulatory announcement, as the sale was not price-sensitive and did not constitute a significant transaction. Yet, news reports at the time noted that DFI's share price surged after the market got wind of the sale. The way I see it, investors will have to be alert as Singapore's listing standards shift. IPO prospectuses may be less voluminous in the future, but they should be scrutinised just as carefully. With fewer public queries about unusual trading activity, those market signals could become more potent drivers of sentiment. As for DFI's decision to not announce the sale of its Cold Storage and Giant stores via SGX, my sense is that it probably won't do any lasting damage to its investor following. Much like the rest of the Jardine Matheson group, DFI does a good job of providing useful information about its business strategy and performance. More to the point, DFI appears to be in the midst of a big turnaround. Indeed, the sale of its Cold Storage and Giant stores dovetailed with its broad strategy of pruning its business portfolio while investing in technology and harnessing data to drive its overall profitability. DFI's shares are up 18.2 per cent this year, versus the Straits Times Index's 2.9 per cent gain. Coming conflicts? This brings me to the stewardship role that institutional investors are expected to play. As this column previously asserted, one consequence of the chronic undervaluation of locally-listed stocks is that controlling shareholders may have less incentive to ensure their companies are run for the benefit of minority investors. What is the point of striving for higher earnings if this often does not result in a company's shares trading at a richer valuation? Why not just try to take the company private for less than the book value of its assets? Boards of such companies may do only the bare minimum for minority investors when they push for value unlocking initiatives, or when they baulk at lowball privatisation offers. In theory, a well-resourced institutional investor would be in a better position than a small-time minority shareholder to press a company to reposition its business and unlock value. The question is whether there are enough institutional investors focused on the Singapore market to make a difference. Keep in mind that the boards of companies with dominant shareholders will not easily be persuaded to take the side of minority shareholders in a fight. The institutional investors themselves might not have the stomach for such a conflict, if it potentially threatens their larger business interests. We can only hope that MAS carefully chooses the firms to which it allocates the S$5 billion of funds to reinvigorate the market. In the meantime, investors hunting for opportunities in the local market should perhaps narrow their search to companies that are not only priced attractively and have solid businesses, but that also have the same inclusive attitude towards minority investors as Buffett's Berkshire. Companies win trust not by disclosing what regulators require, but by revealing everything investors should know about what they own.
Straits Times
15-05-2025
- Business
- Straits Times
MAS proposes streamlining disclosure requirements in IPO prospectuses
Disclosure requirements for companies considering initial public offerings in Singapore could be simplified to make the listing process less onerous for issuers. PHOTO: BT FILE SINGAPORE – Disclosure requirements for companies considering initial public offerings (IPOs) here could be simplified to make the listing process easier and help firms provide more relevant information to investors. The Monetary Authority of Singapore (MAS) said on May 15 that it is consulting the public on proposed amendments to regulations under the Securities and Futures Act. The exchange regulator, Singapore Exchange Regulation (SGX RegCo), is also conducting a concurrent public consultation on the relevant amendments to listing rules. The moves come after an MAS-led review group announced new measures in February aimed at reviving trading on the SGX. These include getting selected fund managers to invest at least $5 billion of seed capital in promising non-index SGX stocks, and requiring family offices here to also invest in the stock market. The proposed regulatory changes towards a less prescriptive and more disclosure-based system for IPOs are part of these measures. Streamlining disclosures for primary and mainboard listings Companies seeking a primary listing on the SGX will be required to disclose information that is most relevant to investors. For example, the issuer is now required to disclose the list of all entities owned by the company's directors or controlling shareholder that operate in the same business as the issuer. This generates excessive details about these entities. 'The existing requirement will be streamlined to require issuers to provide clear disclosure on the core substance of conflicts faced, instead of purely factual information about the entities,' noted the MAS consultation paper. There are also proposals to ensure that the time and costs needed to compile the information is commensurate with the informational value to investors. For example, companies have to get an outside expert to confirm their profit predictions when they list on the stock market. The MAS is proposing to remove the requirement for such a third-party expert to confirm an issuer's profit forecasts, citing challenges in obtaining such endorsements due to the judgment involved. Instead, the issuer's board should be responsible for ensuring the forecasts are prepared in line with accounting policies and based on reasonable assumptions. This aligns with practices in the EU and Britain. Meanwhile, interim financial statements may be required in a prospectus only if the most recent full-year financials are more than nine months old at the time the offer document is lodged. This change would give issuers a longer window to launch their IPOs without having to prepare interim statements, a process which usually takes several months. 'A longer launch window is especially important in times of high market volatility,' the MAS said. There are also proposals to reduce the scope of disclosures required of past events or historical details where these are less relevant to investors. SGX RegCo is also consulting the public on easing the criteria for mainboard listings, while upholding the quality of applicants. SGX RegCo chief executive Tan Boon Gin noted that the regulator plans to retain a prescriptive approach in critical areas such as financial health, the track record of directors, management and controlling shareholders. However, for other aspects, the focus will shift towards enabling issuers to ensure clear and robust disclosures that allow investors to make well-informed decisions, without the regulator mandating how specific issues must be addressed. Simplifying process for secondary listings The MAS is looking to align Singapore's disclosure requirements for secondary listings with international standards. Issuers that want a secondary listing in Singapore and to offer shares to retail investors are now required to comply with the same prospectus disclosure requirements as issuers seeking a primary listing here. A proposed amendment will allow companies already listed overseas to use their existing prospectus with minimal adjustments when seeking a secondary listing on the SGX. Industry experts have welcomed the proposals. Ms Stefanie Yuen Thio, joint managing partner at TSMP Law Corporation, noted that the granularity with which IPO prospectuses are reviewed, with multiple rounds of comments and questions, has been a longstanding grouse in the market. 'It's good the new proposals will centre on financial and management integrity,' she said. 'IPO aspirants will still need to make full disclosure – that has not changed – but a lot of friction will be taken out of the process.' She noted that under the new regime, investors will have to make more informed and considered decisions and must be prepared to seek recourse in the event of inadequate or wrongful disclosure. 'This also means the law must change to give investors more easy access to information and improved levers to enforce against bad companies.' Investor protection avenues are expected to be addressed in the next round of measures to be announced by the review group later in 2025. Mr Robson Lee, a partner at Kennedys Legal Solutions, noted that shifting from a hybrid prescriptive-disclosure based regime to one where issuers take more responsibility for their disclosures is a move in the right direction, one that will draw more IPOs and secondary listings without compromising standards. 'The spirit of a disclosure-based regime entails the directors of the issuer bearing full responsibility for the statutory and regulatory compliance requirements,' Mr Lee said. It also fosters more market discipline through the principle of caveat emptor, or buyer beware, as investors take personal responsibility for their investment and securities trading decisions, he added. Deloitte South-east Asia accounting and reporting assurance leader Tay Hwee Ling agreed, noting that the shift towards a disclosure-based regime places stronger emphasis on the timeliness, consistency and materiality of information disclosed. Material information is anything that a reasonable investor would want to know before buying or selling a security, as it could affect the company's stock price or the investor's view of the company. 'This empowers investors to make better-informed decisions while requiring issuers to present clear, accurate and comprehensive disclosures – especially in how their financials support their growth narrative and long-term value proposition.' Join ST's Telegram channel and get the latest breaking news delivered to you.
