What's dragging SGX's lacklustre equities business?

2017 was the worst year for delistings, with 29 of them outpacing 17 initial public offerings.

The lacklustre equities business of the Singapore Exchange (SGX) is facing some structural issues, including a declining turnover velocity caused by recent delistings and privatisations, Maybank Kim Eng revealed.

According to a report, the turnover velocity, or the total traded value relative to the average market capitalisation, has been trending down across regional exchanges over the past 10 years.

Maybank KE estimates that overall turnover velocity declined from 49% in 2011 to 27-29% between 2014 to 2017.

"The decline in velocity can be attributed to lower traded value from lower market activities, coupled with a lack of substantial growth in market capitalisation," said analyst Ng Li Hiang.

SGX’s equity market capitalisation grew at around 4% compound annual growth rate (CAGR) between 2012 to 2017.

However, its market cap lags behind its Asia Pacific peers. The Hong Kong Exchange's (HKEX) market cap is close to five times higher than the SGX. This was caused by increased delistings and privatisations in recent years.

The number of listed securities on SGX decreased by 31 from 2010 YTD. The number of delistings also outpaced initial public offerings (IPO) in five of the past eight years, with 2017 being the worst with 29 delistings vs 17 IPOs. Generally, the number of IPOs has been on a downward trend since 2010.

Maybank KE thinks SGX has not been able to attract large IPO listings due to a number of factors such as lower trading volumes, higher listing and administrative costs, alternatives from private equity funds, low valuations as companies found their listings not worth keeping, which also made them potential privatisation targets.

"Singapore-based companies have chosen to list elsewhere than on SGX," Ng said. Recent companies that come into mind include Razer and SEA Ltd which listed on the HKEX and the New York Stock Exchange, respectively.

Whilst the net market cap of IPOs turned positive for the first time at $5b, almost 50% came from the lone mega deal of Netlink NBN Trust.

Maybank KE suggests initiatives that could translate to more listing opportunities like collaborative listings with Nasdaq and government agencies.

Meanwhile, market capitalisation as a percentage of GDP has been high for Singapore. At 216% in 2016, this implies that Singapore’s capital market could be outsized compared to the scale of the economy.

The people you want to reach are already in this room.

Every quarter, SBR lands on the desks of the founders, CFOs, and directors running Asia's most consequential companies. Every day, they open our newsletter and read our website. It's a room that took twenty years to build — and it's the one most of our partners are trying to get into.

The good news is that the door is open. We work with companies on thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. The shape of the right partnership depends on what you're trying to do, which is why we'd rather start with a conversation than send a rate card.

If you have something this room should know about, tell us. We'll tell you honestly whether we can help, and how.

No rate cards until we understand the brief. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia