Expats joke that Singapore has three temperatures: hot, hotter and hottest. What is not so hot is the city-state’s listings roster. Political unrest in Hong Kong was expected to displace a chunk of Asian initial public offerings to Singapore. That has not happened, damaging the location’s claims to be a regional financial hub.
There is a fundamental lack of choice in fundraising venues in Asia. Fractious Hong Kong still dominates. This year, there have been just two floats on the Singapore Exchange’s main board and three secondary listings. Many big deals involve real estate investment trusts — hardly the most exciting propositions.
There are plenty of incentives to list and operate in Singapore. Tax rates are low, the legal system is transparent and politics are stable. Dual-class shares, a prerequisite for many entrepreneurs and family owners, are permitted.
Emperador, the Philippines’ biggest liquor company, and US data centre company Digital Realty Trust are reportedly exploring secondary listings. The lonely duo contrasts with the flood of Asian companies listing in Hong Kong and — controversially — New York.
Hong Kong conglomerate Jardine Matheson moved its listing to Singapore in 1994. That has given it some shelter amid political ructions back home. Even as shares of Hong Kong-listed Swire Pacific fell by more than two-thirds from its 2019 peak to trough, Jardine’s stock dropped about 40 per cent.
Lower valuations are one reason market debutantes are shunning Singapore. The city-state lacks Hong Kong’s huge retail investor base. Jardine trades at 15 times forward earnings, a 32 per cent discount to Swire.
Tropical weather is not the only issue with geography. This could bring the stock exchange two local heroes — the delivery and payments start-ups Grab and Gojek. But Singapore and Malaysia lack the humming tech ecosystem of China.
Hong Kong has exhibited a stronger grip on business than pessimists bargained for. Singapore still has much to recommend it. But it may take a series of fiercer crackdowns by China on business and Hong Kong to tilt the balance of advantage in Singapore’s advantage.
The Lex team is interested in hearing more from readers. Please tell us what you think of Singapore’s prospects as a regional financial hub in the comments section below.
