As plans to revitalise SGX spur liquidity, companies should prioritise shareholder value and accountability

Business Times

14 hours ago

THE national effort to revitalise the local market kicked into a higher gear last week, with the Monetary Authority of Singapore (MAS) announcing the appointment of the first batch of fund managers under its S$5 billion Equity Market Development Programme (EQDP).
MAS said on Monday (Jul 21) that it will place a combined initial sum of S$1.1 billion with Avanda Investment Management, Fullerton Fund Management, and JP Morgan Asset Management.
Participants in the EQDP are expected to focus on the mid-cap and small-cap segment of the market, and pursue fund strategies that improve liquidity and broaden investor participation. The next phase of fund manager selection under the EQDP is expected to be announced by the fourth quarter of 2025.
MAS also said last week that S$50 million has been set aside to enhance the Grant for Equity Market Singapore (Gems) scheme, to support new listings and strengthen the equities research ecosystem. In addition, MAS outlined plans to better enable investors to seek recourse if they suffer losses due to market misconduct.
Not surprisingly, these moves reinforced the already bullish sentiment in the market. The Straits Times Index ended last week more than 1.7 per cent higher – led by DFI Retail Group, which climbed 13.1 per cent on news of a bumper dividend payout.
Other big gainers included property counters such as CapitaLand Investment (up 3.3 per cent), City Developments (up 8.1 per cent) and UOL Group (up 2.8 per cent).
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ST Engineering, the best-performing component of the STI so far this year, was up 5.6 per cent last week amid reports of continued contract wins.
Among the banks, DBS was up 4.4 per cent while UOB rose 0.4 per cent. OCBC slipped nearly 0.9 per cent.
There was also a surge of interest last week in non-STI stocks that analysts expect will be pursued by fund management firms that receive EQDP funds. For instance, Maybank's list of 'potential EQDP beneficiaries' included: AEM (up 11.7 per cent), ComfortDelGro (up 13.1 per cent), Food Empire (up 8.4 per cent), Frencken Group (up 15.2 per cent), iFast (up 5.1 per cent), Nanofilm Technologies (up 17.3 per cent), Sheng Siong (up 2.9 per cent), and UMS Integration (up 4.8 per cent).
Given this positive reaction, it seems to me that the EQDP could be a potent driver of the Singapore market in the months ahead. In fact, if the funds under EQDP are made available to small investors, I might invest some of my own money in them.
Prioritise shareholder value
There are, of course, lots of reasons to worry that liquidity created by the EQDP in the smaller-cap segment of the market will ultimately prove to be fleeting. For one thing, some of the complementary supply-side initiatives to improve the vibrancy of the local market and draw more exciting listings are not new.
The Gems scheme, for instance, was originally introduced in 2019 to defray the cost of seeking a local listing, and develop the equities research ecosystem. MAS said last week that the latest S$50 million being allocated to the programme will provide additional funding for research on listed companies, and help research houses reduce the cost of distributing their work through digital media.
There will also be new funding support for research on private companies with a strong Singapore presence. The idea is to stoke investor interest in these companies, and build a pipeline of potential listings.
Meanwhile, listing grants under Gems will be expanded to cover Singapore Depository Receipts (SDRs), and foreign Depository Receipts with underlying Singapore stocks. The overall funding for primary listed exchange-traded funds (ETFs) will also be increased, while a new funding sleeve will subsidise cross-listed and feeder ETFs.
These moves are aimed at broadening the investor base for Singapore equities and spurring liquidity in the local market. But why were earlier rounds of subsidies for research and new listings not more successful? Why would it be different this time around?
Was a big demand-side initiative such as the EQDP the only missing piece to the puzzle?
My own view is that the EQDP has the potential to make a big difference in boosting overall liquidity in the Singapore market. In the end, however, this liquidity will flow towards opportunity.
Back in February, as the STI began breaching new all-time highs for the first time in nearly 18 years, this column pointed out that the robust gains charted by the index since the end of 2023 were driven by a narrow group of companies – which had been actively unlocking value and strengthening their core businesses.
The key to restoring the vibrancy of the Singapore market is for more companies to similarly prioritise shareholder value. Fund managers under the EQDP should use their influence as shareholders to ensure this happens at the companies in which they are invested – even if it means running up against the vested interests of their boards and controlling shareholders.
Accessibility and accountability
This brings me to the idea of enabling investors to seek recourse when they suffer losses due to market misconduct. MAS said it will consult later this year on proposals to enable investors to ride on a court action or civil penalty to seek compensation.
MAS will also consult on proposals to allow for representatives – such as the Securities Investors Association (Singapore), or Sias – to organise and carry out legal action on behalf of investors.
In addition, MAS will consult on setting up a grant scheme to defray the costs of organising investors and taking legal action for cases involving market misconduct.
While the proposals MAS has in mind may address the 'friction' investors face in taking civil action against companies, I wonder if they will be all that helpful in practice.
In the case of Noble Group, for instance, the authorities only commenced investigations in late 2018, more than three years after Iceberg Research began sounding the alarm about the company's financial statements. By the time MAS imposed a civil penalty of S$12.6 million on the group in 2022, most of its value had already been lost.
Unless regulators can act more quickly when trouble emerges, investors may have little to gain by trying to ride along with them and may be better off quickly selling their shares instead of seeking recourse.
As for representatives taking legal action on behalf of investors, Sias said last week that it 'stands ready to act' if appointed to assist with any litigation. However, it reiterated its long-held position that it is better to engage with companies in the boardroom rather than a courtroom.
'If this time-tested approach should fail, Sias will then seek mediation at the Singapore Mediation Centre,' it added.
The way I see it, Sias should not be pushed to take on a role that does not align with its philosophy. It may be more efficient for MAS to create an entity for the specific purpose of taking legal action on behalf of investors when market misconduct occurs.
The appropriate forum for investors to engage with listed companies on most matters, in my view, is neither the boardroom nor the courtroom but the public square. Besides enabling investors to seek recourse when companies stumble, perhaps MAS should also push the boards and management of untroubled companies to make themselves more accessible and accountable to investors.
As the EQDP spurs liquidity, this could be an important aspect of forging lasting vibrancy in the Singapore market.