Singapore Exchange (SGX)

[dreamybear]

Perhaps taking some ideas from the Income deal update ...

My point is more about the CDP charges per transfer, e.g. how is the pricing derived ? is it competitive ? would alternative fee structures be better for the retail investors ? are charges being reviewed regularly given the technology advancement ?

Would it be better for our stock market if CDP is a separate non-profit institution(assuming it's under SGX P&L currently ? ) given the unique role in the ecosystem ?

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Singapore blocks Income-Allianz deal but leaves door open if concerns over public interest are fully addressed
https://www.channelnewsasia.com/singapor...ng-4675491

[weijian]

Would it be better for our stock market if CDP is a separate non-profit institution(assuming it's under SGX P&L currently ? ) given the unique role in the ecosystem ?

hi dreamybear,

The CDP is a wholly owned subsidiary of SGX. Besides been the depository agent (ie holding stocks in trust) as discussed, it is also a clearing house that removes the counterparty risk talked about earlier.

I do not think this role is unique in the ecosystem as it is very common elsewhere. For example the LME, bought by HKEX some time back, is a clearing house between commodity traders.

Risk is multi-fold. Taking low risk actions doesn't mean you will achieve results of lower risk. For example, keeping money in the bank is a low risk move against failed investments but exposes one to other risks like scams or inflation. Actions to address known risks will probably create new risks. For example, car seat belts were invented to address mortal injuries resulting in fatal car accidents but because they felt safe, more non-fatal accidents happened as a result even as fatal accidents did reduce.

[ghchua]

Hi dreamybear,

In my own personal view, the price structure of CDP is competitive. Considering most of the CDP account holders are long term investors, they only incur a one off transfer fee or higher brokerage for CDP settlement. Otherwise, there are no ongoing charges like platform fees, quarterly/annual fees, rights/dividends handling fees, minimum trades to maintain account etc.

For those who prefer cheaper rates, they are mostly frequent traders as higher fees eat into their transactions as they transact frequently and possibly will not be attending AGMs as well. For these group of people, I would recommend them to transact with discount brokers using custody accounts, since they would not be holding their positions long enough to justify higher one-off fees.

Of course, one can use a combination of custody and CDP accounts to hold your shares, depending on your time horizon for those set of stocks that you are interested in. Some for long term holdings, some for trading only.

[weijian]

Hi Mr Chua,

Cool, got it, clear, had missed that line on queries being more targeted. Thought it was one of those anodyne boiler plate comments / commentary that SGX is known for, sometimes I wonder whether the lack of competition is what makes SGX lazy, then have to remind myself that it is a small market and they are trying their best and they cannot exactly force good corporate governance or shareholder friendly corporate behavior.

Hi Shrivathsa,

SGX does produce plenty of boilerplate statements/commentary but based on my observation as a shareholder, they are definitely not "lazy". If they had behaved as described, there would have been slim chances of them starting their index derivative business ~10years ago and similarly their FX/commodity futures products ~5years ago.

There is also no lack of competition for SGX. The competition is in the entire Asia Pacific region and not confined to local or even ASEAN.

Finally, SGX's role in good CG or shareholder friendly behavior is a lot of times tied to historical context and the ultimate legislative body (MAS). Historical context in the sense that many Asian businesses are family started-family owned-family dominated. If tables are turned and we are now tycoons, would we treat OPMIs (whom have no impact in the business) as fairly as we hope they would while we were OPMIs? MAS also sets Securities and Futures Act (SFA) of Singapore. If someone who practised poor CG gets off with just a reprimand, is it really a MAS (legislative) or SGX (police) problem?

[weijian]

Well, it is debatable whether the KPIs are unrealistic (due to macro environment beyond SGX staff's control) or a problem with the talent bench.

Based on Prof Mak's earlier (and valid) observation of CEO Loh Boon Chye's pay for performance remuneration, maybe CEO Loh could lead by example and put a big portion of his pay (like 30%, because the equities business has ~30% of total revenue) to the same performance targets as his IPO unit underlings?

On another note, after Temasek/Capitaland tried to buy back the 99year lease of Paragon, another 2 more small caps also announced SOAs in the last week from a bigger rival/partner and a PE firm. The advisors of these Offerors have learnt and are all going the SOA route now. De-listings are coming fast and furious.

Singapore Exchange veterans leave amid stock market revival push

The changes come as some insiders at the firm have cast doubts on a broad effort by the Singapore government to revive the nation’s stock market. The IPO unit’s performance targets include more than doubling the number of new listings from seven in the last fiscal year that ended in June, and preventing more delistings. Some SGX staffers believe the goals are unrealistic and impossible to achieve, Bloomberg News reported earlier.

The exchange has struggled for years to get more companies to go public in the city-state, and delistings have frequently outnumbered new debuts. There were only four IPOs on SGX in 2024 totalling US$34.4 million, the second-lowest in more than two decades, data compiled by Bloomberg show. Just last week, the local sponsor of Paragon Real Estate Investment Trust offered to take it private.

https://www.businesstimes.com.sg/compani...vival-push

Econ Healthcare SOA: https://links.sgx.com/1.0.0/corporate-an...d2db10fcdf

PEC Ltd SOA: https://links.sgx.com/1.0.0/corporate-an...6bb5e04551

[Big Toe]

I see it slightly differently.

Delisting outnumbering listing means there is a lot of under valued listed companies. Which is great.
What is not so great is the extreme low liquidity but you cant have everything.
What this means is if one is to invest in illiquid stocks, one needs to hold for an indefinite timeline.

Also the cure for low valuations and low liquidity is even lower prices/liquidity.
To a point where it becomes a no brainer to invest in a company.
Speaking from a perspective of an investor, not speculator/trader.

[weijian]

I see it slightly differently.

Delisting outnumbering listing means there is a lot of under valued listed companies. Which is great.
What is not so great is the extreme low liquidity but you cant have everything.
What this means is if one is to invest in illiquid stocks, one needs to hold for an indefinite timeline.

Also the cure for low valuations and low liquidity is even lower prices/liquidity.
To a point where it becomes a no brainer to invest in a company.
Speaking from a perspective of an investor, not speculator/trader.

hi Big Toe,

While we have similar conclusion wrt to under valuation and the low liquidity, but I have a slight difference conclusion to "holding for an indefinite timeline".

To clarify, I used to think like that until I realize that "I am an investor/owner" is nothing more than dogma...  I mean, I still invest in a company with a "I will hold forever" mindset but definitely not in a company that "I have to hold forever". 

The main consideration is really the opportunity costs of holding an undervalued company that is illiquid, especially in the absence of a potential catalyst. Mr Market has good reasons for persistent undervaluation and generally he is more right than wrong. There are not a lot of 10years left after we realize Mr Market is right after all.

To paraphrase FundSmith's Terry Smith - We are not wired for compounding maths. So in general, we underestimate the true value of things that persistently give good growth and returns. And inverting this - we generally overestimate the true returns of things that persistently give poor returns (ROIC severely below cost of capital).

[Big Toe]

An investor will not have the mindset of the owner unless the investor uses his own money and owns a significant or majority stake OR runs a similar business for a considerable period of time (ie >10yrs). An owner does not actively think of selling, period. Unless circumstances forces the owner to do so. It is not dogma, it is hardwired default.

You do not know when the catalyst will come, we have very little idea what the market will do next. But if you have done your sums right, most of the time, things will work in your favor. Sometimes the wait is short, sometimes the wait can be very long. Sometimes things just dont work out.

It is like entrepreneurship. If one constantly need coaching and motivation classes to be a entrepreneur. One should just quit starting a biz and take the easier path of paid salaried worker.

[specuvestor]

Agree with Big Toe that investor mindset and business owners are different. Investors can bail easily but not business owners or even stakeholders like suppliers

Business owners think in terms of cashflow and payback period. Until they looking to IPO they probably don't know what is the PE of your business. But there are those 20% "business owners' who just want to bail out for quick buck as well, especially when there's exuberance.

In fact I told IR of a company that you shouldn't listen too much to analysts or fund manager's suggestion, especially hedge funds cause they are short term stakeholders. You can get some advice on financial engineering from finance people but I doubt many can run a business despite having myriad of suggestions

In fact at risk of sounding sacrilegious, I would think having good capable employees will drive business and customers which will drive shareholders' value, not the other way round. On an A-B-S basis then it is on the structure side that the shareholders get an equitable deal.

[weijian]

@BigToe,
I have started a small business myself to appreciate the POV of an owner. It has helped tremendously in my own journey as an investor. I invest with an owner mentality but I do not behave like one. Why would I do that? ie. behave like an owner when I am investing? As an investor, I have the privilege of bailing out when the facts are wrong, a luxury not really afforded in business. But in Munger's words, why would I want to tie up my own leg in an ass kicking competition? This is really the basis when I use the word "dogma".

@specuvestor
Would IR of a listed firm listen to their boss or investors/analysts? Surely, it cannot be the latter right? The way I see IR, at least in the local context, it is nothing more than a listing expense not paid to regulatory authorities. Of course, I do not rule out IRs able to make a difference to package a decent company to look "really good". But if it is just a donkey with 4 legs and a tail, no way the IR can spin it as a 5 legged horse!