RPT-BREAKINGVIEWS-Singapore stock market subsidies are worth a shot

By Antony Currie

MELBOURNE, July 24 (Reuters Breakingviews) - At least Singapore is putting its money where its mouth is. On Monday, the Monetary Authority of Singapore announced it had selected three asset managers, including JP Morgan JPM.N, to invest S$1.1 billion ($860 million) in local stocks. It's the first slug of a total of $4 billion that the Lion City has committed as part of the Equity Market Development Programme (EQDP) that aims to increase its bourse's moribund activity. It's risky, but worth a shot.

It's not easy to create demand from above for a securities market. When it's a matter of setting up a rival exchange, it usually takes an inbuilt advantage for it to succeed – say when the Deutsche Börse DB1Gn.DE took back the Bund futures contract from London more than 20 years ago. But it's a different matter to revive an existing trading platform where there simply has not been enough investor interest in its wares.

The Singapore Exchange's stock market needs help of some kind. Daily trading volume of less than 1 billion shares pales next to the more than 200 billion shares that change hands in Hong Kong. Meanwhile, total primary and secondary share sales worth $1.6 billion so far this year may be ahead of this time 12 months ago but are on track to be well under the already low $7.5 billion in 2020.

A major part of MAS's solution, after almost a year of consultation and preparation and years more of hand-wringing, is to make a concerted effort to throw money at the problem. In addition to handing funds to money managers, companies that choose Singapore for a secondary listing can get a S$40,000 grant, with up to S$280,000 for each new exchange-traded fund. New research notes can benefit from higher subsidies than before too.

It might succeed if it's only a lack of awareness or liquidity keeping investors away from small and mid-cap stocks. The EQPD will at least put that properly to the test: one of MAS' criteria for selecting those managing its money is their pledge to crowd in other investors. But authorities have set no public targets by which to judge the plan's progress.

Even a modest improvement would be a success. Otherwise, it would be time for Singapore to concede its stock market will remain less than an also-ran, and put its money to better use.

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CONTEXT NEWS

The Monetary Authority of Singapore on July 21 allocated the first S$1.1 billion ($862 million) of a planned S$5 billion to asset managers with the aim of increasing liquidity and broader investor interest in companies listed on the Singapore stock exchange.

The MAS had formed a review group last August to recommend steps to strengthen the equities market in the city. The S$5 billion fund is one of the key elements of the resulting Equity Market Development Programme unveiled by the MAS and the Financial Sector Development Fund in February.

Avanda Investment Management, Fullerton Fund Management and JPMorgan Asset Management are the recipients of the first tranche of the fund.

In addition, MAS will pay S$250,000 for primary listings of exchange-traded funds, up from the current S$100,000, and S$180,000 for cross-listed and feeder ETFs.

The MAS also committed S$50 million to be spent on trying to increase research coverage of stocks. Research providers can already receive up to S$4,000 from the state for each report published. The additional cash will increase that by S$1,000 and by a further S$1,000 if the report is "an initiation of research coverage or covers pre-IPO stage and newly listed companies".