SGX Bill – Speech by He Ting Ru

Delivered In Parliament On 11 January 2022

Mr Speaker, 

Changes in economies and capital markets the world over, triggered by Covid, has meant that stock markets too need to adapt to deal with disruption and have to continually fight to stay relevant and attractive to investors. Indeed a Business Times article in September last year noted that, in line with global trends, SGX has seen a ‘flurry of privatisation offers’ in 2021. This has meant a decrease in the number of companies listed on the Exchange, which is a cause for concern.

To add to the picture, some commentators have opined that there is a likelihood that money will start flowing to listings in emerging markets. They predict that emerging markets themselves may even go so far as to require domestic companies to list locally and to encourage foreign companies who are trying to raise capital within their borders to also list within that jurisdiction, rather than look to capital markets in the more established markets such as New York, London, Hong Kong and even Singapore. 

Yet, it has also not escaped the notice of many that there are growing concerns about whether SGX has become illiquid and uncompetitive, and that companies looking to widen their capital base would do better to look elsewhere.  Indeed, of late, our homegrown success stories such as Grab and Razor have chosen to list overseas. All this has implications for SGX and the liquidity of our local capital markets, as our success has historically relied on foreign entities being willing to fundraise by using our domestic market as a platform to access capital in the region. 

Turning to the structure of SGX the listco itself, to which this Bill and its amendments relate, I note that the company’s ownership structure is highly diversified, with many international shareholders from large asset managers like BlackRock and Schroders, to pension funds like the Japanese government pension fund. The largest single shareholder remains SEL Holdings Pte Ltd with around 23% of shares, although I note as well that there is a restriction on the exercise of its voting rights attached to its shares. While it is good that solid investors have indicated their willingness to invest in SGX, we must not be complacent about the competitiveness of our Exchange and take this for granted.

Set against this, I have a few clarifications that I wish to seek of the MOS.

Do the amendments allow subscription offers to be made to existing shareholders? If so, where will funds come from in order for SEL to subscribe for any new shares? Also, what is MAS’ updated position relating to allowing shareholders to increase stakes above 5%, and also if an offer is made by another stock exchange to acquire or merge with SGX? While historically, regulators have been somewhat cautious to allow super stock exchange mergers —  as evidenced by the rejection of SGX’s bid to acquire the Australian Stock Exchange over a decade ago – recent research into super stock exchanges appears to suggest that there need not be huge concern about the exploitation of market power of these large exchanges. Admittedly though, there may still be concerns of national interest when considering such M&A activity relating to SGX itself. 

Next, turning to the beneficiary of the SGX shares held by SEL. The beneficiary of these shares – old and new – is the Financial Sector Development Fund (FSDF). The FSDF’s objectives primarily relate to the promotion of Singapore as a financial centre, and the development of our financial services industry. Would the MOS be able to give an update if there is any intention to expand the role or impact of the Fund given the potential increase in SGX Shares held to its benefit?

Moving on to governance, by which I mean the governance of the board, and also the dual role of MAS as both regulator and promoter. What are the criteria applied to determine whether a director is sufficiently independent for sitting on the board of SEL? Could the MOS consider outlining a clear framework of the various factors to be considered when appointing independent directors for SEL for the purposes of greater transparency and confidence? As MAS has to both promote and grow the finance industry, and also serve as a regulator of the industry (in our case, of SGX and our capital markets), what are the processes and frameworks that are put in place to address any conflicts or perceived conflicts that may arise from this? For example, in the UK, the Financial Conduct Authority was formed by the carving out of the former Financial Services Authority in the wake of the Global Financial Crisis to be able to focus as its serves its function as the regulator of the finance industry. 

I would also like to seek greater clarity from the MOS about if and how the amendments to the Act will make it easier for the Exchange to compete and stay relevant in the changing landscape, that it would not become moribund one day. How would these ensure that our stock market, and by extension – our capital markets and finance industry remain competitive and attractive to investors who are increasingly looking for the next best thing to put their money in? What other steps are our regulators and authorities taking to ensure the sustainability – and thus the livelihoods of many of our people employed in these industries – of our capital markets remain healthy, when we look to the long-term? 

Mr Speaker, I support the Bill.

Thank you.