k_hongkong
When people compare two financial centers, they would compare the two currencies (and capital control);;; the two AUMs [1];;;; the two financial sectors’ workforces;;;; the two work visa policies;;; the two regulators (and stable, progressive legal frameworks);;;; the two tax regimes [for institutions, investors and employees];;;;; the two English proficiency standards;;;; and the two cities’ financial (beyond stock-) exchanges. By these standards, Shanghai is lagging behind as a _global_ financial center. In Singapore’s case, Sg stock exchange has been losing market share, losing “customers” [IPO companies, retail investors,,,], but things are not as disastrous as perceived —
- SGX is more than the (sleepy) stock exchange… SGX is profitable mostly from derivative business including commodities.
- Singapore is doing fine as a financial hub, esp. a PWM center, albeit with a sleepy local stock market.
- Switzerland is a PMW financial center, without big financial exchanges. I think Singapore has chosen a similar direction.
- Therefore, the persistent criticism on SGX relative to HKEX is being challenged and rebuffed in the Bloomberg article below.
As to the eq business, SGX is playing the hedgehog, presumably resigned to a shrinking market share, and tightened “quality control”, in a bid to strengthen its reputation as home to conservative, traditional, proven (some say Sunset industry), safer stocks. Such stocks are “suitable” for local investors + some private banking clients. I guess many institutional investors globally like the defensive dividend stocks on SGX.
I think a nearby regional bourse may boast far more listings (than the Sgp bourse), but often mixed quality, including many small, less proven stocks that may not qualify for the major exchanges. Analog — my dad authored many quality academic books, but far less than other authors of low-quality books.
[1] aggregate AUM across all financial companies of a city is an indicator of aggregate profit, tax revenue, and fund mgmt job market. More broadly, AUM (smart_money) is also an indicator of the financial stability of the country. Temasek^MAS_OFR^GIC shows about SGD 5T AUM. Note Smart_money is different from hot_money. Smart_money is legally free to leave but there are financial consequences so most investors “stay here” long term.
— based on a 2019 Bloomberg article (https://www.bloomberg.com/news/features/2019-02-11/the-incredible-shrinking-singapore-stock-market)
As of 2021, Singapore was ranked #2 most competitive (not largest) wealth management center — ahead of Hong Kong and second only to Switzerland globally.
One reason why total listing is lower on SGX than other exchanges? SGX doesn’t “refrain from delisting zombie companies just to keep its numbers up”. A smaller pool of companies limits the choices investors have, even as the fund management industry continues to grow. A lot of private bank money is now in Singapore, and they actually like the core, somewhat boring, defensive stocks.
SGX main board’s backbone consists of safe, steady stocks favored not for their growth prospects but for their dividends.
Q: Are SGX stocks showing better total return than other regions, measured in SGD?
A: yes, better than all regions (except U.S.), mostly due to dividend
A: measured in USD, I think picture would be even stronger
Having a sleepy stock market (SGX) does little to burnish Singapore’s reputation as a financial hub, according to one practitioner.
A Maybank economist and a SGX officer both cite SGX’s strengths as:
- an established REIT market;
- notably high valuations for medical-services companies;
- a good track record in listing consumer stocks
- about half of the companies listed on SGX are foreign
- institutional money trusts the Singapore market