Speech by Mr Kwa Chong Seng, Chairman of Singapore Exchange, at The 12th Lujiazui Forum 2020
1. Good afternoon,
Mr Yi Huiman, Chairman of CSRC (China Securities Regulatory Commission);
Mr Gong Zheng, Acting Mayor of Shanghai;
Distinguished guests, fellow panelists;
It is indeed my privilege to be a part of the prestigious Lujiazui Forum.
2. Participating in this forum virtually is a stark reminder of the new reality we are now in. For a virus that knows no borders, COVID-19 proves how globalised our society is today. The virus has taught us that in order to secure a sustainable future, borders must remain open, and trade and capital must be allowed to flow. What is crucial now more than ever before is cross-border cooperation and partnerships.
3. Let me share some brief thoughts on what I believe can help strengthen the future of Shanghai and Singapore as key gateways into China and the ASEAN region, respectively. As you may know, ASEAN has some of the most dynamic and rapidly growing emerging markets, with their favourable demographics.
MUTUAL CONNECTIVITY
4. Firstly, collaboration is key to connecting China to the international markets. Global investors are keen to access China and participate in China’s rapid growth, while Chinese investors also need to diversify and invest in global markets.
5. SGX’s product portfolio of equities, fixed income, currencies and commodities enables our clients to invest in China in multiple ways. More importantly, our portfolio mirrors Singapore’s role as an Asian entrepôt for international capital, commodities trading, shipping and many MNCs base their Asian Treasury Centres here. Singapore, for example, is the third largest foreign exchange centre globally with average daily FX trading volume reaching a new high over US$600 billion in April last year. SGX is also the largest Asian FX futures marketplace.
6. As China internationalises, Singapore plays a relevant role in serving global trade between China and the rest of the world. SGX, as Asia’s most international multi-asset exchange, is well-positioned to support Shanghai’s international connectivity efforts. Building platform connectivity between the two markets can help attract more foreign investors into the domestic market.
7. The bond market, in particular, holds immense opportunities. In 2018, SGX, Bank of China, and China Foreign Exchange Trade System signed a joint cooperation agreement to promote the CFETS-BOC Traded Bond Index and its sub-indices to international investors, making SGX the first exchange to distribute these indices outside of China.
8. Further partnership in the bond markets will not only accelerate the inflow of foreign capital and deepen the development of China’s money markets, but also support the internationalisation of the RMB.
MUTUAL FLOWS
9. Secondly, stronger linkages between Singapore and Shanghai can help strengthen Shanghai as an investment destination and an international source of capital. Singapore is Asia’s wealth management hub with a broad base of institutional investors and sovereign wealth funds, and can help Chinese companies tap foreign currency inflows. Assets under management (AUM) in Singapore have grown to about S$3.5 trillion, despite challenging global financial markets which saw overall global AUM decline. The introduction of the Variable Capital Companies Act this year elevates Singapore’s position in becoming a globally competitive fund domicile, another reason for us to be a growing channel for capital flows.
10. To support mutual capital market flows, SGX has a partnership agreement with the Shanghai Pudong Development Bank (SPDB) to strengthen capital market ties between Singapore and Shanghai. As strategic partners, SGX and SPDB work together to help Chinese enterprises raise funds through IPOs, listing of REITs and bonds, among others.
11. Such partnerships go a long way to deepen ties through knowledge exchange and joint discovery of business opportunities.
FINANCIAL INNOVATION
12. Last but not least, Shanghai and Singapore can work together to harness financial innovation to catalyse growth in our markets.
13. SGX’s position as a neutral and trusted market infrastructure has given us a unique opportunity to take the lead on some of Singapore’s fintech initiatives. We see technology as an enabler to facilitate seamless exchange of capital and data, supported by robust regulation. With technology, we can advance the mobility of financial capital across borders. Exchanges can link and build liquidity pools across multiple venues and trading protocols, enhance transparency and price discovery, and develop a broader universe of global participants.
14. SGX is also working in areas such as Distributed Ledger Technology, artificial intelligence and data science. It is still early days for some of these projects, but we are excited by the possibilities.
IN CONCLUSION
15. In closing, I believe that despite the challenges global economies are facing in the immediate horizon, China will eventually enter into what could be a defining decade in terms of economic and technological prowess.
16. We do not take for granted the strong, multifaceted and longstanding relations between Singapore and China. SGX will continue to work hard to strengthen mutual cooperation and success with Shanghai.
17. Thank you and I look forward to a fruitful panel discussion.
