SGX to launch index that tracks listcos beyond STI: Chee Hong Tat

[SINGAPORE] The Singapore Exchange (SGX) will be launching an index that tracks listed companies that are not constituents of the Straits Times Index (STI), as part of efforts to showcase its broader equity market, said Monetary Authority of Singapore (MAS) deputy chairman Chee Hong Tat on Friday (Sep 12).

“This new index will provide a useful lens to track how the next tier of large and liquid companies are evolving – whether through business-model transformation, improved governance or stronger capital-management initiatives,” said Chee, who is also minister for national development. He is also the chair of the equities review group set up by the central bank in August last year to look into strengthening Singapore’s equities market.

STI, the benchmark index for Singapore’s stock market, is made up of the 30 largest companies by market capitalisation. However, it represents only a portion of SGX’s listed companies.

Speaking at a conference organised by the Singapore Institute of Directors, Chee said investor interest in listed companies outside STI is growing – partly as a result of a new investment initiative which will channel S$5 billion to asset managers with a strong focus on Singapore equities. It aims to boost the liquidity of its capital markets.

“Over time, we hope to see more indices emerge, covering areas such as corporate governance and sustainability – creating a virtuous circle and generating positive momentum for the entire market,” he added.

Indices are a form of recognition mechanism for companies, serving as useful tools that can create visibility for companies and spotlight those that excel. They also track the performance of different industry or market segments.

The setting up of a new index is one of the additional measures Chee unveiled on Friday, with the broader aim of boosting Singapore’s stock market.

Over the last few months, the group has launched several initiatives, in addition to the S$5 billion equity market development programme. Others include tax incentives for companies listing in Singapore, as well as consolidating listing and prospectus disclosures under a single regulator, to speed up the process of reviewing a listing.

Creating visibility

Beyond the new index, Chee said the review group is working with SGX to provide more platforms that could amplify companies’ efforts and market presence. This is especially so for smaller companies that tend to struggle for more visibility.

“SGX will hold investor roadshows or trade fairs which companies can participate in, to gain exposure to institutional and retail investors. SGX may also arrange for media features and engagements designed to help profile listed companies that have a good story to share with the investing community,” he added.

However, listed companies also need to put themselves forward by communicating their strategic plans, holding regular investor engagements, and making themselves more accessible. All this involves going beyond standard financial reporting to capture the attention of investors.

Chee said: “They want to understand your growth story, not just your current performance. They want visibility on capital allocation, clarity on long-term strategy, and confidence that management is committed to creating value… (Companies) must present a compelling narrative of how today’s actions will translate into tomorrow’s success…

“When companies combine strategic value creation with effective communication, they create the conditions for investor confidence. This in turn translates into investment dollars, which drives better share price performance and creates greater shareholder value.”

Effective communication means providing company updates beyond just once a year at annual general meetings. Chief executive officers can use mainstream or social media to regularly articulate their company’s vision, and engage investors and other stakeholders.

They can also share views on their outlook and prospects – commonly done in overseas markets – as it gives investors greater visibility of their trajectory and also demonstrates managements’ confidence in delivering strategic objectives.

As there are concerns about the potential legal exposure when companies disclose such information, Chee said MAS will review how it can provide more clarity on its regulatory framework. As a result, there can be more open communication without compromising on market integrity.

Beyond communicating more, a mindset shift is also required among corporate leaders, as their focus turns to strategic priorities beyond day-to-day business operations.

“They must actively develop long-term plans and think about value creation with shareholders in mind… For listed companies, the IPO (initial public offering) is not the destination, but a gateway to raising further capital, business growth and long-term shareholder returns,” he said.

Ng Yao Loong, SGX’s head of equities, said that “sustainable growth in our stock market is in large part dependent on Singapore’s listed companies unlocking shareholder value”. 

He added that stronger corporate value-enhancing practices generate greater visibility, while recognition through index inclusion motivates better performance. “Together with transparent disclosure, these efforts will make listed companies – especially those beyond the STI – more visible to institutional and retail investors alike.”

Tan Boon Gin, CEO of Singapore Exchange Regulation, urged companies to engage with investors better. “Companies that want to be noticed and rewarded for having quality management and business strategies must proactively communicate their outlook and strategies to provide forward-looking guidance.”

Chew Sutat, pro tem chairman of SGListCos – the association representing Singapore-listed companies – said: “While some listed companies are already making strides in enhancing shareholder value and articulating their strategies, it is imperative for all listed companies to step up to tap this momentum.”

The review group is developing a set of measures to support companies in unlocking shareholder value. More details will be announced later this year.

SGX is also reviewing what else companies can do to disclose policies such as dividend and investor relations, as these would enable investors to understand the company’s capital management approach, engagement practices and how management will deliver shareholder value.