In countries like Malaysia, Thailand and Australia, locally domiciled funds that are mostly linked to domestic pension funds account for a constant flow of liquidity into the local markets.
The recent pullback in market volumes here – from 38.6 billion shares in September to 29.3 billion shares in November – has raised concerns that the EQDP funds alone may not be enough to sustain the uptrend over a longer term. SGX’s current daily liquidity of around S$1.5 billion still falls far short of several of our neighbours.
OTHER INITIATIVES TO CONSIDER
More can be done to attract liquidity, such as custodial services.
Currently, the Central Depository Board acts as the sole safekeeper of Singapore-listed securities where securities are held directly in the investor’s own name. Most investors do so for benefits such as having access to annual general meetings and being able to exercise shareholder voting rights.
Brokerages are completely cut off from providing this service, either in the open market or issue of IPOs, and provide custodian accounts that hold shares on behalf of investors.
Tweaks to the brokers’ custodial role for Singapore-listed stocks could boost liquidity, given their capability to support margin financing and collateralised trading.
The government’s review group has said more can be done to facilitate the adoption of broker custody accounts. This is to enable the offering of more investment services like portfolio management and fractional trading. Doing so also aligns with global practice and encourages more participation by internationally-active asset managers.