Commentary: As delistings continue to outpace IPOs, confidence in Singapore’s stock market is wearing thin

SINGAPORE: Once regarded as a gateway to Asia, the Singapore market is in distress of sorts as an increasing number of listed companies head for the door. To date this year, eight companies have announced plans for delistings. With several more indicating buyout offers on the table, this could rise to a dozen within the next couple of months. Meanwhile there has only been one new initial public offering (IPO) on the local bourse, that of motoring group Vin Holdings. Another, candy maker YLF Group, has just called off plans to list here. This follows a dismal 2024, where the Singapore Exchange (SGX) saw only four IPOs but 20 delistings. Not exactly the kind of news the Monetary Authority of Singapore’s (MAS) Equities Market Review Group (EMRG) would welcome. Set up last year to devise measures which would inject life into SGX, the EMRG has already announced several measures, including a S$5 billion Equity Market Development Programme – an initiative designed to encourage more investment in Singapore-listed equities. Corporate tax incentives and rebates, streamlined listing processes and simplified prospectus disclosure requirements are part of the plan. While these steps are positive on paper at least, the events of the past five months suggest that investors are not exactly tripping over themselves to list on the local bourse. Volumes remain modest at best and prices are largely subdued (which some might say is a positive in a volatile and unpredictable world). But there is no denying that the Singapore equity market faces some serious underlying problems which prevent it from playing to its full potential.

LOW LIQUIDITY

Chief amongst these is low valuations. About two-thirds of the over 600 listed companies on SGX are trading below their net tangible values. This undervaluation is particularly pronounced amongst small and mid-cap stocks, despite many of these companies being profitable and paying attractive dividends. As a result, their stocks are priced at a significant discount to valuations that they might otherwise fetch in private deals or even on other exchanges. This has prompted not only privatisations by controlling shareholders, but has also attracted offers by third parties, as were the cases for Ban Leong Technologies and Amara Holdings. The root cause of this undervaluation is low liquidity. Trading volumes on the SGX are not only significantly lower than those of larger markets like Hong Kong and the US, but generally also lag regional bourses such as Kuala Lumpur, Bangkok and Jakarta. While there are many reasons why this is so, one reality is that the Singapore market is dominated by sectors like property, conglomerates and banking stocks. Tech stocks barely feature here. This is unlike Wall Street, where tech stocks, led by the so-called Magnificent Seven, dominate. Even in Hong Kong, new economy plays like Tencent, Alibaba, Xiaomi and JD.com attract strong investor interest which often then filters through the entire market. Without a sufficiently large ecosystem of new economy growth plays, the Singapore market will continue to struggle to attract the next generation of inventors.