Good afternoon and thank you for joining us today.
This past month, we have watched our Singapore stocks climb a wall of worry.
Some have attributed this strength to Singapore’s safe-haven status. Others have pointed to our Equity Market Development Programme, or EQDP.
Certainly, since the formation of the Equities Market Review Group in August 2024, we have seen progress on several fronts.
First, through the EQDP, 6.5 billion dollars have been committed towards investments in strategies with a focus on Singapore-listed equities.
SGX has also announced market structure enhancements – such as smaller board lot sizes – to reduce trading friction. And, we have recalibrated our regulations to improve price discovery.
These are tangible actions that have produced tangible results in a short space of time. Last year, the daily average value of securities traded, or SDAV, increased 21% to almost 1.5 billion dollars.
In February, SDAV hit 2.1 billion dollars – the highest level since 2020.
Second, SGX has partnered the Monetary Authority of Singapore to launch a Value Unlock programme that is helping issuers strengthen their investor engagement and sharpen their focus on value creation.
This programme includes grants to support capability building, initiatives to help issuers communicate effectively and networks to inspire action.
My SGX Group colleague Jeremy will share more on the progress of the capability-building portion of the Value Unlock programme shortly.
But before that, I want to touch on the interaction between investor engagement, market discipline and the value creation philosophy that should be driving everything.
Signalling breeds market discipline
Studies show that high-quality investor relations (IR) support value creation by signalling intentions and increasing trust. Although IR cannot, by itself, move a stock, it can ensure that the market accurately reflects an issuer’s performance. In other words, it closes the valuation gap.
We have already made it clear that we want issuers to provide more information, such as forward guidance. And, as stated in our Regulator’s Column that we’ve published, we do not intend to call companies out for over-communication.
On the contrary, through the capability-building and community development parts of the Value Unlock programme, we are equipping issuers with the skills and platforms needed to engage in activities and communications that support value creation.
Through regulation, we want to ensure that issuers will in fact do so.
Today, we are launching a consultation on several proposed enhancements to our disclosure requirements.
Number one, we want issuers to be clearer about the KPIs they use to decide what their board members and executive officers are paid, and how those KPIs are related to value creation.
With this, investors can make their own calls about whether issuer KPIs make sense in the context of the company and align with shareholder interests, as well as hold the board and management accountable to these KPIs.
Number two, we also see room for issuers to be clear about their dividend policies. That doesn’t mean we are calling on them to pay dividends. That is for the board and management to decide.
We are calling on them for more transparency to their investors. So, if they are not paying dividends because, say, they are in a growth phase and they need to re-invest all their profits, then they should say so.
Investors can then express their view on whether they agree this is the best use of cash on the balance sheet.
Finally, we want issuers to describe their investor relations policies, share what investor engagements they have done for the year and maintain their own websites for investor engagement.
Again, by themselves, these activities will not move a stock. That is not what regulation is for. That is the job of the market.
Our job as regulators is to promote transparency, motivate best practices and drive market discipline.
We see these rules as pushing both boards and shareholders to think more about value creation and forming a foundation for two-way engagement.
The long game
Now, some market participants have called on SGX RegCo to be even more prescriptive in its disclosure requirements.
They would like us to emulate Japan, for example, which has asked companies to disclose concrete plans to move their price-to-book values above 1.
But let us remember, Japan’s Value-Up programme has been more than a decade in the making, and Singapore is only at the beginning of this journey.
Our market participants need time to build up their capabilities, develop their networks, and change their practices.
We also need time for the demand-side measures of our Value Unlock initiatives to take effect. Fund managers need to engage more deeply with our local issuers, and the funds themselves need to be deployed to increase liquidity and close valuation gaps.
Japan is a country that understands the value of doing things well over time. Today, Japanese knives are among the best in the world. Why? Because the country has over 800 years of history as a blade maker.
In the city of Seki, there are blacksmithing workshops that go as far back as the 13th century. The city has built an ecosystem to crowd in the necessary talent and raw materials to support excellence in sword forging and knife crafting.
Singapore needs time to build a similarly strong ecosystem for its market. To be clear, I’m not saying that we are going to need 800 years. I am saying that the impact that regulation has on value creation takes time to manifest.
The consultation we are launching today is just one step. The market can look forward to more steps as we progress along this journey of excellence.
