MAS review group proposes tax perks to boost Singapore’s equities market as a start

The Monetary Authority of Singapore’s (MAS) equities market review group proposes to introduce tax incentives to spur more listings and investments in the local equities market, in its first set of measures announced on Thursday (Feb 13).

These measures include tax incentives to attract enterprises and fund managers to list in Singapore. They also aim to encourage the launch and growth of funds with substantial investment in local equities.

The review group was set up last August and is chaired by Second Minister for Finance Chee Hong Tat, who is also a board member of MAS. The group also includes private-sector stakeholders and public-sector representatives.

Its focus is to improve the competitiveness of the equities market through a set of proposals to catalyse investor interest and boost the supply of quality listings, and to streamline the regulatory process for initial public offerings.

Growth capital access

“The review group’s focus is to strengthen the competitiveness of our ecosystem to enable the sustainable growth of Singapore’s equities market,” said Chee, adding that this is a “challenging task with no easy solutions”, as a significant proportion of global capital is concentrated in a small number of major stock exchanges such as Nasdaq and the New York Stock Exchange.

“We have been discussing with industry stakeholders and developed a set of measures aimed at helping Singapore enterprises access growth capital, and attracting quality enterprises with a regional presence to list in Singapore,” he added.

These enterprises include mid-sized companies that may not have ready access to major capital markets, but could use Singapore as a launch pad for raising capital. Also included are companies which are already listed elsewhere, but are interested in a secondary listing in Asia.

Some market watchers, however, believe tax incentives would not address the “fundamental issues” facing the Singapore market.

“(They) will not fundamentally alter the decision-making process of where companies decide to list, which will still primarily be based on market valuations,” Lee Ooi Keong, a member of the Singapore Institute of Directors told The Business Times.

He added, however, that it is “a fallacy that there is no liquidity in Singapore”.

“The recent outperformance of the local banks reveals that there is sufficient liquidity from Singapore investors if the companies are producing good results,” he said.

Carmen Lee, head of OCBC investment research, believes that “streamlining the regulatory process” will be a positive move to make it a less tedious or long process.

However, she pointed out that the decision behind a company listing is dependent on numerous factors – including pricing, valuation, availability of other meaningful companies in similar industries and trading liquidity – which have to also be considered to “increase the vibrancy of the market”.

S Nallakaruppan, president of The Society of Remisiers (Singapore) called the first set of proposed measures “a good initial initiative”.

“The aim to encourage more funds to invest in our equity market and spur more listings is a step in the right direction,” he said.

“We will need a much deeper capital market with a much broader investor base which includes institutional investors, hedge funds and retail investors to ensure an efficient price discovery system,” he added.

GIC and CPF Board involvement

Some market players have also suggested that sovereign wealth fund GIC support the local equities market. However, Chee said that the review group does not recommend requiring GIC or the Central Provident Fund Board to invest their funds in domestic equities to inject trading liquidity.

He noted that “GIC’s mission is to preserve and enhance the international purchasing power of Singapore’s reserves”.

He explained that the monies managed by GIC serve key national objectives, and the sovereign wealth fund should be allowed to make investment decisions professionally and commercially.

GIC should not be required to have a specific allocation to local equities if such investments result in lower overall returns, as doing so will not be in the best interests of Singapore and Singaporeans.

Chee added: “I also do not believe that it is sustainable to use such a ‘pump-prime’ approach. It is more effective for us to look at how we can strengthen the fundamentals of our market ecosystem, which is what the review group has been focusing on.”

Next update on Feb 21

A fuller update on the review group’s first set of measures will be provided on Feb 21.

The group will also continue to work on the next set of measures to foster longer-term development and sustainable growth of Singapore’s equities market, which will be presented in the second half of 2025.

The first set of measures has been submitted to Prime Minister and Minister for Finance Lawrence Wong.

The review group said that it has engaged a wide range of stakeholders across the capital markets ecosystem to gather feedback and ideas.

It is supported by two workstreams. The enterprise and markets workstream focuses on ways to encourage listings, increase investor participation, improve trading liquidity, and facilitate fair valuations for listed equities.

Meanwhile, the regulatory workstream looks into streamlining Singapore’s regulatory framework, improving the listing process, and enhancing the effectiveness of the current disclosure-based regime. It also aims to strengthen corporate governance standards, investor access, and recourse.

Source: The Business Times © SPH Media Limited. Permission required for reproduction.

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