The issue with SGX growth and Singapore economy

The previous post on the new chief of SGX outline the growth strategy of SGX sets me thinking on the same issue.

SGX is facing a lot of difficulties attracting quality companies to list. Major exchanges around the world provides a far more attractive proposition due to capital flow, economic and geographic location. To be frank, SGX have been grappling with this issue for very long time and they have yet to find a good solution or niche.

The lack of quality listing on a domestic exchange is tied to the strength and depth of the local economy. For Singapore, the local SMEs and industries are rather weak. Local companies gets the most recognition in the home market and will tend consider listing the local stock exchange first before considering other bourses. A mis-step by the government policies is while they did a good job in attracting foreign MNCs to set up their base in Singapore. The policies failed in encouraging growth and support for the local industries and companies to grow into larger, regional or global companies.

I would argue that SGX faces a structural challenge. I would make a distinction between government linked companies operating as public listed commercial entities. I do not consider them as success stories in terms of government policies and strategies in growing local companies and industries. If government linked companies are discounted from the listed companies on SGX, the list of locally born and bred companies which made it to listing on SGX would be a rather embarrassing report card.

All business factors have to be seriously examined, manpower, salary, infrastructure, rental costs, transportation options,etc. All of them have an effect, especially magnified for smaller companies with much less spare resources than foreign MNCs. Unless there are major changes to business factors, the continued challenges for SGX will never have a satisfactory solution.