[h=1]Brand Singapore Takes a Beating[/h][h=2]The city-state wants to be Asia’s top financial hub, but disappearing market capitalization makes that tough[/h]
ENLARGE
Singapore’s stock exchange is carrying a lighter load of shares than it used to as delistings add up and fresh listings grow scarce. Photo: Wallace Woon/European Pressphoto Agency
By Jake Maxwell Watts and
P.R. Venkat
July 25, 2016 8:13 a.m. ET 0 COMMENTS
Singapore’s ambition to become Asia’s top financial hub is taking a battering.
The biggest hit has been to its public markets: This year alone, nearly $5.5 billion in market capitalization is expected to vanish from Singapore’s stock exchange when flagship companies like global container shipper Neptune Orient Lines Ltd. and rail operator SMRT Ltd. delist.
More value has evaporated in the 44% dive this year in the stock price of high-profile commodities trader Noble Group Ltd. , after short sellers criticized its accounting and governance and the company reported a $1.2 billion write-down. Noble blamed the write-down on weak coal demand from China and said an independent review of its accounting found no wrongdoing.
Trading volume is higher than last year’s, but the market has remained dull.
The combined market capitalization of Singapore’s stock exchange has fallen to less than $664 billion from more than $740 billion two years ago, according to exchange figures. Fresh listings are scarce. The last high-profile one was in 2011—a $5.5 billion offering by a trust company set up by Hong Kong billionaire Li Ka-shing. With investor appetite for new shares weak, businesses have shunned public markets in favor of private deals.
Singapore’s reputation for handling private money flows has also been tarnished by local regulators’ allegations of breaches or lax enforcement of money-laundering regulations at several financial institutions, which arose from an investigation into fund flows connected with Malaysian state investment fund 1Malaysia Development Bhd., or 1MDB. Among the banks cited were Singapore’s largest, DBS Bank Ltd., and local branches of Standard Chartered Bank PLC and UBS Group AG. All three banks said Thursday that they had reported suspicious transactions and questionable activities to the central bank. 1MDB has denied wrongdoing and said it will cooperate with any lawful investigation in accordance with international protocols.
“There is no doubt that the recent findings have made a dent in our reputation as a clean and trusted financial center,” said Ravi Menon, managing director at Singapore’s central bank.
Singapore’s role as a regional hub for the trading of commodities, including oil, has been hit by weak global energy demand, which has also dented the share prices of many locally listed companies that deal in commodities.
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Still, Wall Street firms like Goldman Sachs Group Inc. and Morgan Stanley continue to run their Southeast Asia businesses out of Singapore, and some banks have been boosting their asset-management operations there even as they cut back on investment bankers. Total assets overseen by Singapore-based asset managers stood at $1.8 trillion at the end of 2014, the latest figure, up 30% from a year earlier.
ENLARGE
But in stock trading, Singapore has been hard hit by a global decline in the popularity of going public. The number of listed companies globally slid 6% between 2008 and the end of 2015, to 43,539, according to the World Federation of Exchanges, even as the global market cap—soaking in cheap credit from central banks world-wide—swelled to nearly $61.8 trillion from $32.3 trillion.
“The relative attraction of the private markets and for mergers and acquisitions is very much a part of the global cycle,” said Chew Sutat, Singapore Exchange Ltd. ’s head of equities and fixed income. He said global M&A activity has been driven by cheap borrowing rates.
Global technology startups such as Uber Technologies Inc., valued at nearly $68 billion, are shunning IPOs in favor of raising private capital, whose sources may be more forgiving of cash burn as long as there is fast growth. IPOs have been weak in the U.S. as well, prompting a powerful coalition of chief executives, including Berkshire Hathaway Inc. ’s Warren Buffett and J.P. Morgan Chase & Co.’s James Dimon, to push for a new best-practices standard of to revive them.
In Singapore, heavyweight state investment firm Temasek Holdings Pte. Ltd. has backed many privatization deals and been a big investor in Asia startups.
For example, last week it offered to buy out minority holders of Singapore’s $1.9 billion rail operator SMRT, and so end that company’s 16 years of trading on the local exchange. SMRT, which also runs buses and a taxi fleet, said it wanted to operate without the “short-term pressures of being a listed company.”
Singapore suffers another handicap in its fight to be Asia’s finance capital: Hong Kong, the other big contender, has been able to count on a steady stream of IPOs from mainland China—including the coming $7 billion listing of Postal Savings Bank of China Corp. Hong Kong’s exchange operator itself is valued at $30 billion, compared with Singapore Exchange’s $6.1 billion.
Singapore’s stock exchange is carrying a lighter load of shares than it used to as delistings add up and fresh listings grow scarce. Photo: Wallace Woon/European Pressphoto Agency
By Jake Maxwell Watts and
P.R. Venkat
July 25, 2016 8:13 a.m. ET 0 COMMENTS
Singapore’s ambition to become Asia’s top financial hub is taking a battering.
The biggest hit has been to its public markets: This year alone, nearly $5.5 billion in market capitalization is expected to vanish from Singapore’s stock exchange when flagship companies like global container shipper Neptune Orient Lines Ltd. and rail operator SMRT Ltd. delist.
More value has evaporated in the 44% dive this year in the stock price of high-profile commodities trader Noble Group Ltd. , after short sellers criticized its accounting and governance and the company reported a $1.2 billion write-down. Noble blamed the write-down on weak coal demand from China and said an independent review of its accounting found no wrongdoing.
Trading volume is higher than last year’s, but the market has remained dull.
The combined market capitalization of Singapore’s stock exchange has fallen to less than $664 billion from more than $740 billion two years ago, according to exchange figures. Fresh listings are scarce. The last high-profile one was in 2011—a $5.5 billion offering by a trust company set up by Hong Kong billionaire Li Ka-shing. With investor appetite for new shares weak, businesses have shunned public markets in favor of private deals.
Singapore’s reputation for handling private money flows has also been tarnished by local regulators’ allegations of breaches or lax enforcement of money-laundering regulations at several financial institutions, which arose from an investigation into fund flows connected with Malaysian state investment fund 1Malaysia Development Bhd., or 1MDB. Among the banks cited were Singapore’s largest, DBS Bank Ltd., and local branches of Standard Chartered Bank PLC and UBS Group AG. All three banks said Thursday that they had reported suspicious transactions and questionable activities to the central bank. 1MDB has denied wrongdoing and said it will cooperate with any lawful investigation in accordance with international protocols.
“There is no doubt that the recent findings have made a dent in our reputation as a clean and trusted financial center,” said Ravi Menon, managing director at Singapore’s central bank.
Singapore’s role as a regional hub for the trading of commodities, including oil, has been hit by weak global energy demand, which has also dented the share prices of many locally listed companies that deal in commodities.
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Still, Wall Street firms like Goldman Sachs Group Inc. and Morgan Stanley continue to run their Southeast Asia businesses out of Singapore, and some banks have been boosting their asset-management operations there even as they cut back on investment bankers. Total assets overseen by Singapore-based asset managers stood at $1.8 trillion at the end of 2014, the latest figure, up 30% from a year earlier.
But in stock trading, Singapore has been hard hit by a global decline in the popularity of going public. The number of listed companies globally slid 6% between 2008 and the end of 2015, to 43,539, according to the World Federation of Exchanges, even as the global market cap—soaking in cheap credit from central banks world-wide—swelled to nearly $61.8 trillion from $32.3 trillion.
“The relative attraction of the private markets and for mergers and acquisitions is very much a part of the global cycle,” said Chew Sutat, Singapore Exchange Ltd. ’s head of equities and fixed income. He said global M&A activity has been driven by cheap borrowing rates.
Global technology startups such as Uber Technologies Inc., valued at nearly $68 billion, are shunning IPOs in favor of raising private capital, whose sources may be more forgiving of cash burn as long as there is fast growth. IPOs have been weak in the U.S. as well, prompting a powerful coalition of chief executives, including Berkshire Hathaway Inc. ’s Warren Buffett and J.P. Morgan Chase & Co.’s James Dimon, to push for a new best-practices standard of to revive them.
In Singapore, heavyweight state investment firm Temasek Holdings Pte. Ltd. has backed many privatization deals and been a big investor in Asia startups.
For example, last week it offered to buy out minority holders of Singapore’s $1.9 billion rail operator SMRT, and so end that company’s 16 years of trading on the local exchange. SMRT, which also runs buses and a taxi fleet, said it wanted to operate without the “short-term pressures of being a listed company.”
Singapore suffers another handicap in its fight to be Asia’s finance capital: Hong Kong, the other big contender, has been able to count on a steady stream of IPOs from mainland China—including the coming $7 billion listing of Postal Savings Bank of China Corp. Hong Kong’s exchange operator itself is valued at $30 billion, compared with Singapore Exchange’s $6.1 billion.
