Singapore’s stock exchange (SGX) last week announced a partnership with the New York Stock Exchange (NYSE) that will see the venues jointly promote dual listings, and explore new exchange-traded fund (ETF) and ESG offerings.
While NYSE is the world’s largest stock exchange by market cap and constantly ranks among the world’s top listing venues, SGX has traditionally struggled to attract high-profile listings. Of the nine companies listed on SGX in the first half of 2022, three are special purpose acquisitions companies (SPACs) lured by the city-state’s recent introduction of a SPAC framework.
FinanceAsia sat down with Pol de Win, head of global sales and origination, to understand why the collaboration makes sense for both parties, how it works, and to get his take on the outlook for global IPO markets.
FA: Why did you embark on this partnership, and how does it work in practice?
PW: This is not something completely new; we work with overseas exchanges on an ongoing basis. Capital markets is a global and integrated business, and being connected with folks across the world is going to be increasingly important, given the environment that we see unfolding over the next five to 10 years.
Throughout my investment banking career, I’ve experienced a swing of capital allocation from the West towards the East. Over the last five to 10 years, a big part of this has been focussed on China, but increasingly, we see Southeast Asia turning the corner, and more and more investors pursuing opportunities out here. Many of these are global investors. Both for us and for NYSE, it makes sense to have an integrated, streamlined offering for issuers and investors to capture such.
We have joint transactions with NYSE and other exchanges already. In total, about 30 companies are dual-listed on the SGX – NIO Inc. being the most recent example. Going through the process with NIO, we realised it makes sense for us to align as closely as possible.
Alignment means that we have short lines of communication with our counterparts at NYSE, that we make the dual listing processes as easy and frictionless as possible. Some of that alignment is regulatory; some of it is on the commercial side. Underlying the memorandum of understanding (MoU) is a joint effort to target companies that are considering dual listing opportunities.
The dual listing concept doesn't make sense for every single issuer. If you are a $200 million market cap, single-market business, there's no reason why you would list on multiple exchanges. If you're a $5 billion-plus company trying to gain prominence in other parts of the world however, it makes more sense.
So, it's really about identifying those for whom we believe a dual listing makes sense, and we’ll have that conversation alone or jointly with our partners.
FA: As the world’s largest stock exchange by market cap, NYSE must get more inbound queries than SGX. How does the partnership benefit the US exchange, and to what extent is the partnership spurred by the global market slowdown?
PW: It might be true for a company like SEA or Grab, who are big and have a global profile, that the US provides more liquidity. But that may not the case for a $1 billion Asian business – in the US, that’s relatively small, and they just won’t get the attention and focus that they require.
Actually, most of the supply of companies emerging these days – and that's why I'm super excited and bullish about our prospects – is coming from Singapore, and the broader Southeast Asian region.
The technology companies are finally mature and large enough to consider the start of their public market journeys. Our sweet spot is issuers between $500 million and $5 billion. Increasingly, we get the bulk of these inquiries coming straight to us, as opposed to coming through the US.
It's for these companies that are large enough, that a listing across multiple venues makes sense. It's also for the companies that have strategic rationale to gain prominence both in the US and in Asia.
FA: Does this bar you from a collaboration with Nasdaq?
PW: The reality is that we work with a bunch of exchanges, so from our perspective, these are not mutually exclusive.
Chinese issuers that already have a US listing are pretty evenly split between Nasdaq and NYSE. We want to make sure that we can have discussions and facilitate dual listing processes for them.
Very often, issuers will have made up their minds already as to their preferences regarding Nasdaq or NYSE, so from our perspective, we just want to make sure that we are there for either situation.
FA: How will you measure the success of the tie-up? Do you have any specific targets?
PW: We've been doing dual listings before now, so this concept is nothing completely new. It just puts more emphasis on collaboration, because we see there is a bigger opportunity in the years ahead in terms of the number of companies that are suitable for dual listings.
How we're going to measure that is by number of number of dual listing deals successfully executed. But it’s also about making sure that we get the right companies that contribute to the overall market on our platform.
FA: GoGoX recently had to downsize its Hong Kong offering due to market conditions. Do you see a permanent shift towards smaller valuations?
PW: One thing is for sure: the downturn is not permanent. I've been in capital markets long enough to know that markets are cyclical.
It’s a tough market today – there’s no question about that. But our pipeline is actually extremely robust; stronger than it has been in a long time, both in terms of quantity and quality.
The market will normalise – whether after the summer or early next year, nobody knows – and we’re doing a lot to make sure that we build the right platform so that when it does, we're in a very good position to make sure folks have access to it.
Besides the NYSE tie-up, we announced a partnership with Temasek and EDBI to set up a fund for companies in pursuit of SGX listings, and we’re working with brokers in the region to increase accessibility to the SGX for retail investors.
There’s also the SPAC regime that we launched at the beginning of this year.
FA: Three out of nine of SGX primary listings in Singapore in the first half of this year were SPACs. How do you assess the success of the new framework? What is your outlook for SPAC listings, given that a record number of SPACs are still looking for targets?
PW: We’re happy with the initial listings. These listings were well received when they came out and have held up OK. They still have plenty of time to find targets. It’s worth noting that SPACs are anyway barred from announcing de-SPAC targets in their first six months.
The question now is, not how many more SPACs we expect to list, but rather, can we get good quality SPAC listings that add to the overall marketplace?
SPAC markets globally have been challenging since the middle of last year. This also impacts the way that people think about SPACs in this part of the world, although I believe we have a distinctly different offering and framework in place in Singapore, compared to the US. It's less crowded here, and there is still a plentiful supply of companies for whom a SPAC listing may make sense.
My personal view is that SPACs will continue to have a place in the equity capital markets spectrum. Again, this is not for every single issuer – there needs to be a reason why someone goes to the market through a SPAC transaction, as opposed to a traditional IPO. But I think these reasons exist for companies, especially out here in Asia.
FA: Do you have a particular strategy for boosting REITs?
PW: We have a strategy that has been in place for 15 years, and it's been very successful.
If you’d asked me some months ago, I would have expected a handful of listings in the coming 12 months. The reality is different for two reasons: one is the overall market. For REIT listings, you need the market to be there.
On top of that, an increasing interest rate environment affects how the fundamentals of REITs work and investors’ views on the appropriate yields for this type of investment.
In my view, we need more clarity on exactly where the interest rate environment is going. This will impact REIT issuances.
Again, these are market factors. Once they’ve been settled, REIT listings will definitely return.
FA: What can SGX learn from Indonesia’s efforts to attract local unicorn listings?
PW: I think what we learnt is that there is a lot of value that we can add to complement these types of issuances, rather than compete with them.
If these national champions list on their domestic exchanges, they tend to attract domestic investors. It’s not the case for every single one, but if some of these companies have strategies beyond their domestic markets, the need to interact with global investors becomes more relevant and important – that's where we come in.
A very good example is the secondary listing of Emperador on SGX last month, in addition to its primary listing on the Philippine Stock Exchange (PSE). The company is a successful $7 billion liquor business that has real global appeal and reach, and is looking to expand its business across Southeast Asia. The listing in Singapore brings it access to global investors and additional liquidity above that of its domestic market, ultimately giving the firm more prominence.
My sense is that we'll see more of these types of transactions, whether from the Philippines, Indonesia, Vietnam, or elsewhere in the region.
We need to work closely with the exchanges around us as well. With the Stock Exchange of Thailand (SET), we’ve developed a depositary receipt (DR) linkage, for example.
FA: What is your outlook for capital markets for the rest of the year?
PW: I'm very optimistic about the medium-to-long term. The outlook here is really driven by macro drivers, investors converging and increasing their focus on the region, and the supply of companies coming through.
In the near term, we’re making sure that we put the infrastructure and processes in the right place so that we are the venue of choice for issuers from Singapore and the broader region – including China, as soon as the market recovers.
