Out of steam

Singapore needs a new IPO story

Singapore remains a gateway to Asia, but not when it comes to raising equity. Up-and-coming neighbours are eating away at its share of initial public offerings in southeast Asia. It is hard to see what Singapore can do to arrest what looks like a long-term decline.

The city-state's annual share of equity issuance in local markets including Malaysia, Indonesia, the Philippines and Thailand averaged 45 per cent between 2004 and 2009. That has fallen to 37 per cent over the last five years.

In 2014, despite months of destabilising anti-government protests that eventually led to a military coup, companies in Thailand still raised more money through new listings than in Singapore. Four of the five biggest listings in the city-state last year were safe-but-boring business trusts or real estate investment trusts designed to appeal to yield-hungry investors. The largest IPO raised just $611 million, according to Thomson Financial.

Few neighbouring countries still rely on Singapore when it comes to raising equity capital. A deeper pool of domestic liquidity from local pension and sovereign funds means companies in more populous countries like the Philippines can often achieve a better valuation at home. Foreign investors are also more comfortable dealing directly with these markets than before.

Singapore is trying to think of ways to stem the decline. The problem is that most ideas doing the rounds would offer only a short-term boost to the supply of equity offerings. For example, sovereign-backed investment vehicle Temasek could give the market a boost by listing assets such as Singapore Power or ports operator PSA International.

The city could also make a renewed effort to attract international listings: bankers are still hoping for a possible flotation of auto-racing group Formula One. Allowing companies to maintain different classes of voting stock might help, but rival exchanges could quickly follow. Besides it's hard to see why upstart technology groups would choose Singapore over the US.

It's a demoralising state of affairs as Singapore prepares to celebrate its fiftieth anniversary of independence. The city that views a vibrant stock exchange as a pillar of a strong financial centre needs a new IPO story fast.