Having GIC as a cornerstone investor in NTT DC Reit's IPO is a good move for the market too
With a sponsor in global player NTT, there is the potential for NTT DC Reit to become the Asia-Pacific's largest listed data centre Reit, say analysts.
A notable aspect of this listing is sovereign wealth fund GIC's involvement as a cornerstone investor. It is investing around US$100 million – no small beer – for a 9.8 per cent stake in the Reit, making it the second-largest shareholder after sponsor NTT.
One has to go back quite a few years to find a previous example of GIC's stake in a Singapore-listed company.
In 2008, GIC took a stake in logistics company GLP. Subsequently, GLP listed on the Singapore Exchange (SGX), with GIC as the single largest shareholder. Its assets were in China and Japan, despite it being a Singapore-listed firm. GLP was eventually privatised in 2017.
NTT Reit has a Singapore asset, but the rest of its assets are overseas, including in Northern Virginia, the largest data centre market in the world; another of its assets is in Vienna, Austria, a fast-growing data centre market.
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Singapore is, meanwhile, the second-largest market in the Asia-Pacific for data centres, according to the Independent Market Research report for the third quarter of 2024.
Over the years, calls have been made for GIC to support the Singapore equities market, given its deep pockets. Back in 2016, the Singapore Business Federation mooted a proposal to allow for the wider use of Central Provident Fund (CPF) monies to invest in local equities.
And last year, as the Singapore stock market was struggling with a raft of delistings and a dearth of IPOs, the Society of Remisiers (Singapore) also spoke up for GIC's involvement in the local equity marketplace.
In July last year too, Member of Parliament Liang Eng Hwa asked whether the government would consider the suggestion from some industry players that GIC allocate some investment funds to SGX.
Then-second Minister for Finance Chee Hong Tat had replied that GIC's mandate was to preserve and enhance the international purchasing power of Singapore's reserves, especially for crisis needs.
This means that GIC's investment decisions must 'aim to achieve good long-term returns for Singapore'.
'GIC must, therefore, continue to make professional investment decisions, and the government should not direct or interfere with GIC's investment decisions.'
However, the sovereign wealth fund can 'invest in appropriate Singapore companies if these companies have a global footprint and generate good returns for GIC's portfolio', Chee had said.
In the whole scheme of things, GIC's US$100 million investment in NTT DC Reit is but a tiny proportion of its entire portfolio. It nonetheless sends a helpful signal to the local bourse that large listings are back.
While SGX has excelled on the derivatives front, it is the lack of exciting IPOs and the languishing equities trading volume that has drawn criticism.
Having an institutional investor such as GIC participate in an IPO adds credibility to the deal. GIC's presence could even spur retail participation in the market, something which has been sorely lacking for some time.
GIC's brand name could even work its magic with existing listed companies overseas. As the SGX seeks to bring in secondary listings, GIC could use its clout with other listed companies to suggest that they consider Singapore as an alternative listing venue.
Could this be the playbook in which GIC helps attract companies to the SGX? Such moves support the local exchange, yet are aligned to GIC's mandate of investing in companies with a global footprint.
As the competition for listings intensifies, especially with capital continuing to flow to the United States, the moves by the Monetary Authority of Singapore's Equities Review Group to revive the local bourse are all to be welcomed. If our sovereign wealth funds and investment agencies play a more active role, that would be equally welcome.
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