Singapore Companies and Retail Investors Migrate to Overseas Exchanges

by Sunny Tan 
A local reporter, Anita Gabriel argued (Business Times. 12-2-2016 An IPO Elsewhere… ) that while it is natural for a local small cap, 81 Holdings to IPO here, it debuted in the ASX or Australia Stock Exchange and she added that it is not a big loss for the Singapore Stock Exchange.
This assertion more than meets the eye, coming at a time when SGX is facing  a cocktail of toxic problems: crisis in liquidity, effects of MTP or Minimun Trading Price and a drought in IPOs.
A crucial factor that deters companies to IPO here is the low trading volume, hovering around just one billion shares per session and as many as 350 or half the listed companies do not enjoy any trade on any trading day.
SGX’s trading rule kicks in when the share price of any Mainboard counter falls below 20 cents, forcing them to consolidate their shares and so get their price above the threshold level.
What adds to the bugbear is that many counters that went through this exercise see their prices and volume nosedive when they redebut.
It is ironic that some companies that are blessed with solid fundamental, but for some strange reasons, their share prices are below 20 cents.
One company (it wanted to remain nameless) built monstrous skyscrapers that are so tall that their upper storeys pierced the clouds.
They are so beautiful that they won international architectural prizes.
Though its share price languished below the 15 cent level for ages, but it was determined not carry out the questionable MTP exercise.
Another constraint for small cap companies to IPO in SGX’s second board, Catalist is that they will have to find sponsors and the latter will charge hefty fees.
Given the series of constraints, how many small, mid and big caps will list in SGX in 2016?
Such a grim situation make retail investors sense the unfavourable trading milieu, getting them to follow the footsteps of 81 Holdings to overseas exchanges, New York and Hong Kong.
This initiative by retail investors to head to greener pastures has accentuated the already low trading volume of SGX and in the days to come it will reach wafer thin levels and slated to become the coming new normal.
SGX is trying hard to solve this problem so that President of SGX,  Muthukrishnan Ramaswami, reckoned that the solution is to make the exchange attractive to remisers.
During the middle of last year, the then newly minted head honcho of SGX, Loh Boon Chye, suggested a three-step approach to overcome the problem: bring fundamentally strong and big cap companies to SGX, create conditions conducive to all traders and inventvise remisers so that they ramp up trade.
Months passed and any Tom, Dick and Harry can see that there is no sign of a turnaround, instead they see the draconian implementation of MTP and this is sending negative signals to traders and at the same time scaring them out of their wits.
What SGX should do is to dialogue, bury the hatchet and smoke the peace pipe with the rank and file retail investors as they are the ones who provide liquidity to the exchange by their trading and churning of shares.
The big boys or fund managers are not as they are the buyers of big chunks of shares, albeit once in a blue moon and they hold them for some time.
The writer is a retail investor and activist.
Image courtesy of shutterstock.com