SGX Chases a Tech Mirage

Listing hubs lose their value when investors can buy stocks around the world so easily.

Since it became easier for investors to buy stocks overseas, it's become more challenging for the Singapore Exchange to attract international listings. The bourse operator is looking to fight the disruption by becoming the venue of choice for technology companies. While that may boost initial public offerings, it's hard to see the golden days returning.

SGX won approval Monday from its listing advisory committee to allow dual-class shares. The looser rule caters especially to technology companies such as Alibaba, which chose to list in the U.S. instead of Hong Kong because it wanted to use such a structure to keep more decision-making power in the hands of founders. The change comes a week after the institution suggested it may backtrack on a 20 Singapore cents (15 cents) minimum trading price rule for main board companies with a market value of at least S$40 million, another move that would cater to startups.

For SGX, it makes sense to become more flexible. It's not as though the IPO business is growing in leaps and bounds.

Drop Out

The total amount raised through new listings on the SGX has been steadily dropping

Source: Bloomberg

Liquidity has also been dropping in the past few years. SGX seems to have come to terms with the fact that it can't become the New York Stock Exchange of Asia.

Trending Down

Trading on the Straits Times Index, a proxy for liquidity in the SGX, has been trending down over the past five years

Source: Bloomberg

The push, therefore, is to appeal to technology startups. Apart from easier rules on minimum price and dual-class shares, SGX is also backing CapBridge, a Singapore-based company that specializes in helping startups raise funds and go public. CEO Steven Fang explained to Bloomberg Gadfly a couple of weeks ago that one of his goals is to attract new companies that aren't big enough for the Nasdaq. In Singapore, the thinking goes, they can build their market cap and track record before eventually graduating to a U.S. listing. 

The shift fits with Singapore's aspirations of recovering its status as a technology hub and may reverse the slump in listings. That all sounds good on paper. However, Singapore faces competition not only from Hong Kong but from the Australian Stock Exchange, which so far has been quite successful as an intermediary venue. Distance is no barrier: Silicon Valley, after all, is almost 3,000 miles (4,800 kilometers) from New York. 

The strategy also presents added risks for Singapore's local investors. Research shows that 90 percent of startups fail. To be sure, most are companies that haven't sold shares yet; the ratio is far lower for those with publicly traded stock. Still, the chances of losing money are much higher when investing in small caps, especially in the technology arena.

More volatility could make the SGX a more lively venue and increase trading. Even so, this is unlikely to be a game-changer. As the world becomes more interconnected and investors are able to access stocks anywhere, they'll be less willing to stay local. The same technology that Singapore is trying to attract will in all probability continue to shrink the global role of its stock market.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Christopher Langner in Singapore at

    To contact the editor responsible for this story:
    Matthew Brooker at

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