Weak IPO pipeline threatens SGX long-term growth

Limited large listings risk weakening market depth despite strong trading activity

Singapore Exchange’s (SGX) record S$357m half-year profit in FY2026 highlights a sharp rebound in market activity, but sustaining momentum will depend on liquidity durability and a stronger IPO pipeline, according to Jason Saw, Group Head of Investment Banking at CGS International and Lorraine Tan, Director of Equity Research (Asia) at Morningstar.

The exchange’s performance has been underpinned by a surge in trading volumes and investor participation. “Daily liquidity has surged to close to 2 billion this year,” Saw said, pointing to broad-based interest from both institutional and retail investors driving activity.

This influx is also linked to Singapore’s positioning as a safe-haven market amid geopolitical uncertainty. Tan noted that the Singapore dollar is “very stable… known to be a safe haven asset,” with ongoing tensions in the Middle East likely to sustain capital inflows. She added that Singapore’s “defensive status will be extended and prolonged for some time,” supporting near-term market resilience.

Despite the rally, Saw and Tan stressed that fundamentals remain supportive rather than speculative. Saw said “valuations are not expensive… there is earnings growth in the market,” suggesting the current uptrend is anchored in corporate performance rather than excess liquidity alone. He added that “higher trading liquidity will obviously lead to better price discovery,” reinforcing market efficiency.

Policy measures are also contributing to the recovery. Saw highlighted that the government “has started supporting more fund managers to invest in the local market,” whilst retail participation is increasing, particularly in small- and mid-cap stocks.

However, risks remain. Tan emphasised that liquidity, whilst beneficial, must be sustained through deeper capital market development. She said Singapore “still needs to build… a good pipeline of larger company IPOs,” noting that listing activity is critical to maintaining long-term market attractiveness.

Macro factors could also disrupt the rally. Saw pointed to inflation and bond yields as key variables, warning that “inflation and bond use are clearly some of the things… to watch out for,” particularly for interest-sensitive sectors such as REITs.

At the same time, stronger liquidity may reduce structural risks. Tan said a “more liquid, active market… should reduce risks associated with illiquid trades,” improving price stability and investor confidence.

The outlook remains cautiously optimistic. Saw said “we are just at the start of a rally,” with capital still on the sidelines ready to be deployed. However, the sustainability of SGX’s performance will hinge on balancing liquidity growth with macro stability and ensuring a steady pipeline of listings.

As Singapore cements its role as a regional safe haven, the next phase for SGX will be defined by whether it can convert short-term inflows into long-term capital market depth.