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SINGAPORE: Experts suggest Singapore Exchange (SGX) will have to work hard to attract good initial public offerings (IPOs) as competition among major stock exchanges heats up.

With signs of a comeback in the IPO market for 2024, competition among major bourses in Singapore, the United States, Hong Kong, and London to capture new listings is expected to intensify, experts say.

The Business Times reports the slowdown in IPO activity over the past two years was due to aggressive interest rate hikes by central banks, and although there are signs of comeback, uncertainties loom over IPO markets, particularly concerning potential rate cuts by the Federal Reserve.

Vasu Menon, OCBC’s managing director of investment strategy, emphasises the intensifying competition for IPOs.

He said, “There will be a lot more competition for IPOs, and the Singapore Exchange (SGX) will have to work hard and think of innovative ways to attract good IPOs.”

“Investors are quietly worried that if inflation proves to be sticky, then the Fed may not even cut rates or cut rates only marginally – which could hurt riskier assets like stocks,” he added.

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Also, nowadays, because people are being more careful with their investments, it’s harder for companies, especially smaller ones, to become publicly traded.

Tay Hwee Ling, from Deloitte Southeast Asia and Singapore, notes that companies prefer to list on exchanges where investors are familiar with their operations and can support their growth strategies effectively.

US exchanges, particularly, have successfully attracted IPOs, notably from artificial intelligence (AI) firms.

For instance, Reddit’s recent IPO on the New York Stock Exchange garnered significant attention, reflecting investor enthusiasm for AI-related ventures.

Despite SGX’s efforts, challenges remain. Peggy Mak, research manager from Phillip Securities Research, highlights the limited diversity of industries on SGX, particularly in the internet, software, and communications sectors.

This may prompt tech and AI companies to choose US, Hong Kong, or London exchanges over SGX.

Instead, there’s a large number of companies on the SGX that have a lot of assets. These companies usually don’t make as much profit as the money invested in them. They also aren’t as appealing when interest rates are high.

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However, SGX remains optimistic about its future as an IPO destination.

SGX’s CEO, Loh Boon Chye, said:

In this new environment where interest rates are normalising, astute investors with wider investment choices will look for quality companies, which SGX’s international capital-raising platform is well poised to support.”

Given the abundance of high-calibre local companies in Singapore, experts believe SGX will eventually level the playing field with international peers.

Stephen Bates from KPMG Singapore highlights the potential for SGX to benefit from IPOs in regional emerging markets like Indonesia should they seek dual listings. /TISG

Read also: Singapore shares rose on Tuesday—STI increased by 0.3%

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