Singapore Minister of State Alvin Tan Reply for MAS Chairman Lawrence Wong on Singapore Tech Companies to IPO on Singapore Exchange Instead of Foreign Stock Markets: New Investment Funds S$1.5 Billion Anchor Fund @ 65 & S$500 Million EDBI Growth IPO Fund, SGX Launched Thailand-Singapore Depository Receipt to Broaden Access to Capital

4 October 2023

Name and Constituency of Member of Parliament

Ms He Ting Ru, Sengkang GRC

Question:To ask the Prime Minister what are the plans under consideration to (i) encourage locally incorporated tech companies to choose the Singapore Exchange (SGX) over foreign stock markets for their Initial Public Offerings (IPOs), especially if they have been backed by local agencies during the start-up phase and (ii) to attract more investors with risk appetite for investing in start-ups to invest in new IPOs or tech companies currently listed on the SGX.

Answer by Mr Alvin Tan, Minister of State, Ministry of Trade and Industry and Ministry of Culture, Community and Youth, and Board member of MAS, on behalf of Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Chairman of MAS:

1. Mr Speaker, I will address the questions by Ms He Ting Ru in today’s Order Paper as well as the written PQ filed by Mr Desmond Choo ^[1] for yesterday’s Sitting together as they pertain to initiatives in progress to strengthen the attractiveness of Singapore’s equities market.

2. The challenge of sustaining a vibrant and attractive cash equities market is not unique to Singapore. Globally, the number of initial public offerings (or IPOs) and proceeds raised has been declining since 2021 ^[2] . This was driven by the trend of companies staying private for longer, and more recently against the backdrop of a challenging global macro-economic and interest rate environment. In the first half of 2023, global IPO proceeds fell by 36%, while Asia-Pacific IPO proceeds were down by 40% ^[3] .

3. Many stock exchanges are also dealing with the trend of local companies looking to list on large overseas markets like the United States. For instance, the UK’s largest chip design firm ARM Holdings recently listed in the US. Israel has a vibrant start-up ecosystem. Yet many of its companies list in the US due to its deep and liquid capital market and investor base. Nearer to home, Hong Kong is also looking to retain and attract more IPOs amidst the more challenging macro-economic environment.

4. Against this backdrop, we have shared in this House, most recently in November 2022, the initiatives that government agencies and SGX have established in recent years to support the attractiveness of our equities market. We have set up the S$1.5 billion Anchor Fund @ 65, which is a co-investment fund by Government and Temasek, and the S$500 million EDBI Growth IPO Fund, to invest in high-growth enterprises at the late stage or at IPO. MAS has enhanced its grant scheme to defray listing costs and develop Singapore’s equity research ecosystem. SGX has also been actively seeking cross-border partnerships with the regional exchanges, to enhance its attractiveness as a gateway for Singapore companies and international investors to access regional capital markets and opportunities. In May this year, to expand access and connectivity to regional capital markets, SGX launched a Thailand-Singapore Depository Receipt^[4] or DR Connect, to broaden access to capital and to markets. Overall, our initiatives aim to provide a more enabling environment for companies to consider listing on SGX.

5. At the same time, Mr Speaker Sir, we recognise that there are limits to how these measures can directly influence listing decisions. Companies considering possible public listings have several commercial objectives in mind. In some cases, these considerations may prompt them to explore listing venues outside of Singapore. First, they may decide to list in jurisdictions where they can secure the best valuations for their shareholders. For quite a number of companies, a US listing is attractive due to the US’ deeper pool of investors and liquidity. Second, companies may list in jurisdictions that give them better exposure to key target markets. For example, a company planning to expand its business in China may choose to list in either Hong Kong or China, or both.

6. If we take an overly prescriptive approach by making Government support to promising start-ups conditional on a local listing, we may end up imposing a rule that may be at odds with the growth plans of the company or the founder. Similarly, global investors that are in Singapore will ultimately determine how to allocate their capital based on their strategies and how they view the market. If we prescribe that they must invest certain amounts in only locally listed companies, we will effectively constrain their investment mandates and end up losing a larger pool of investors that adopt a regional or global view.

7. Let me next respond to Mr Desmond Choo’s question on SGX’s role in helping SMEs raise capital from overseas markets. One way is to make sure we have good sources of SME financing available to meet our SMEs’ needs. Apart from a well-developed banking system that provides a range of financing options for our SMEs, SGX has Catalist, a second board that caters to the fund-raising needs of growth-stage companies or enterprises, and it currently has over 200 SMEs listed on it. In addition, MAS has a grant scheme which defrays listing costs for issuers listing on Catalist. In 2021, MAS increased the grant cap under this scheme from S$200,000 to S$300,000, to further help SMEs who choose to list on Catalist, to alleviate their listing costs. Apart from accessing public markets, private equity and venture capital, or PE/VC in short, has in recent years been an increasingly important source of growth capital for promising start-ups. More PE/VC managers have established their presence in Singapore and are coming in at earlier stages, which broadens the range of financing for our start-ups.

8. MAS recognises the value of an attractive equities market as part of our overall financial services eco-system. That is why the Government and SGX have in place a range of initiatives to better position our equities market. We will continue to monitor the situation closely, and review and update our measures where necessary to adapt to the shifts in global capital markets.