SINGAPORE: Singapore investors are willing to take risks on volatile growth stocks overseas, but they are unlikely to make similar bets here, where the local market still lacks flow and liquidity, according to Singapore Exchange chairman Koh Boon Hwee.
The problem, in his view, is that the republic has yet to create a level of sustained demand for local shares that gives investors enough confidence to take risks here, and, until then, further capital injections will be needed to sustain demand in the stock market.
Koh was speaking to The Straits Times on the sidelines of the Forbes Global CEO Conference on Oct 8.
“Do they here have the appetite for risk? The answer is yes,” he said, pointing to younger investors who buy overseas stocks such as Tesla and even SpaceX, which is loss-making.
But would they back similar businesses on SGX?
“My honest answer is, right now it’s unlikely, because they understand the constraints here as well,” he said.
This could help explain why many initial public offerings on the local bourse have recently struggled to gain traction after listing, despite efforts by the central bank, the stock exchange and fund managers to revive the local equities market and attract new listings.
Asked whether Singapore would need continued capital injections in the meantime, Koh said “personally, I would think so”, but noted that the decision was beyond him.
While he commended the government’s move to allocate S$6.5bil (US$5.1bil) of investment capital to the local stock market through the Equity Market Development Programme, he noted that it is a “stochastic injection, and not a natural flow”.
He distinguished such injections from the regular and sustained capital flows that pension systems generate in other countries. “Our challenge right now is to create something that is circular and sustainable,” said Koh. — The Straits Times/ANN