GEM aims to give a leg-up to listings and stocks liquidity in Singapore – but where is the excitement?
The Monetary Authority of Singapore (MAS) has launched a new three-year $75m initiative with effect from 15 Feb 2019 in a bid to enhance Singapore’s status as a regional hub for new equity listings.
The move will also boost equity research with MAS releasing funds to back the equity research ecosystem in Singapore
Known as the Grant for Equity Market Singapore (GEMS), the scheme will help defray costs such as legal and underwriting expenses for Singapore Exchange (SGX) listings, as well as provide funds to encourage more research and coverage of listed small-and mid-cap enterprises.
Eligible firms can receive up to 20 per cent ( of funds from an SGX grant) for their listing expenses, up to a limit of S$ 200,,000. while those in high-growth sectors including advanced manufacturing, hub services, logistics and healthcare with a minimum market cap of $300 million will enjoy a higher cap of S$500,000
In a move in line with Singapore’s push towards a digital economy, technology companies with a S$300 million market cap including those in fintech, consumer digital technologies and on-demand services will be able to co-fund their initial public offer (IPO) expenses by 70% of up to S$1 million.
In a nutshell, the move hopes to rev up the development of the future economy in Singapore by attracting smaller or mid-cap, high-growth and tech-oriented companies where IPO expenses can take up a significant portion of the listing proceeds.
The increased and improved quality of research coverage of non-index stocks will also help investors spot companies with promising growth potential and will also enhance their stock liquidity due to better information and valuations. On average, there are more than 15 analysts covering the top 30 listed companies compared to between two and six analysts covering the next 200 companies.
The MAS grant will help, to a certain extent, revive the sluggish Singapore IPO market which only managed to raise about $730 million from 15 IPOs last year.
But will these initiatives be enough to stimulate higher investor interest in shares on the SGX and drive better share valuations ? How can more investors be convinced to invest in shares and not other investment options created by the rise of digital currencies and new asset classes?
If share trading volumes remain weak and valuations continue to be low. companies may not be attracted to list and for listed companies, they may consider shifting to more vibrant exchanges while the investors themselves will seek more exciting investment options.