(Yicai Global) June 24 -- SGX Group, which runs the Singapore stock exchange, is a connector linking the markets of China, Singapore, and the Association of Southeast Asian Nations, according to Chief Executive Loh Boon Chye.
“We see ourselves as a bridge between these markets that promotes cross-border capital flows and China's internationalization,” Loh said in an interview with Yicai Global.
The Regional Comprehensive Economic Partnership, a free trade agreement of 15 signatory countries that came into effect on Jan. 1, will likely see Singapore, as the region’s leading business and financial hub, facilitating more capital flows between China, Singapore, and ASEAN, he said.
Chinese firms now account for 15 percent of the total market capitalization of the Singapore stock exchange, and the bourse continues to welcome new Chinese listings, especially companies looking to expand globally and within Southeast Asia, Loh added.
Excerpts from the interview with Loh, who has been SGX’s CEO since July 2015, follow below.
Yicai Global: You have been SGX’s CEO for nearly seven years. During your tenure, we have seen a lot of work, such as the reform of listing rules, allowing firms with weighted-voting right structures and special-purpose acquisition companies to go public. What is your most important work right now?
Loh Boon Chye: All the initiatives that you mentioned were important steps taken over the past few years to enhance the SGX’s status as the exchange of choice for global market participants to invest and manage risks for domestic and international companies to raise funds via equity or fixed income as well as for investors to preserve and grow their wealth sustainably.
Globally, we have not yet fully recovered from Covid-19. And we're confronted with issues, including a challenging geopolitical environment, rising interest rates, inflation, and slowing economic recovery.
So right now our most important work is to continue maintaining a highly-liquid platform for clients to manage foreign exchange, equity and commodities price risks, and also to facilitate fundraising for our listed companies during this challenging period.
YG: A highly-liquid platform is important at this difficult time. What is the long-term strategy for SGX?
Loh: Our long-term strategy is to entrench our position as a global exchange partner of choice. To do so, we will continue to focus on strengthening our key business lines, embrace digitalization, and take concrete steps as a company and exchange partner towards net zero.
In the last two years, we have made both acquisitions and investments worth SGD1 billion (USD720 million) to capture growth opportunities, and saw these investments pay off due to strong synergies with newly-acquired subsidiaries.
Today, these businesses form the key pillars for SGX Group and will continue to propel the group to its next growth phase, on embracing digitalization with the rapid rise of new innovative technologies. This is an area that we cannot ignore. So we will also be working on digitalizing Asia’s market infrastructure to use new technologies, such as DLT [distributed ledger technology] and smart contracts, especially in the areas of fixed income, currencies and commodities.
Last but not the least is sustainability. As an organization, SGX is committed to net zero, but more than this, because we operate a multi-asset exchange, it allows us to facilitate companies’ and investors’ move towards their green goals by helping them raise the funds they require, manage price, risks, and investing with purpose.
YG: SGX is actively expanding its China business. It has entered into an agreement with China Investment Information Services to distribute its securities market data within China. It has also agreed with the Shenzhen Stock Exchange to develop an exchange-traded fund link. What other plans does SGX have in China? What is your philosophy on expanding business in the country?
Loh: The inception of RCEP will likely see Singapore, as the region’s leading business and financial hub, facilitating more capital flows between China, Singapore, and ASEAN. For SGX Group, we see ourselves as a bridge between these markets that promotes cross-border capital flows and China's internationalization.
And there are three ways in which we play this role. First, providing an effective listing platform for Chinese companies to tap into international investors to raise funds and go public; second, facilitating the internationalization of Chinese assets; and third, widening the range of investment options for Chinese investors.
Chinese companies that are looking to expand globally, especially within Southeast Asia, have gone public and raised funds on SGX to boost their profile and be closer to their customers.
Today, companies from Greater China account for 15 percent of SGX’s total listed companies’ market capitalization. And these companies come from diverse sectors, from property, green energy, health care, technology, entertainment, to manufacturing. In the past two years, even as the pandemic plagued the global markets, we have continued to welcome new listings from China.
And Chinese companies that are already listed on SGX have also successfully raised funds through the secondary market. You will probably have read about the recent public listing of Nio, a premium smart electric vehicle startup from China that successfully completed its secondary listing on the SGX just a few weeks ago.
Another example is Yangzijiang Shipbuilding, which was listed on SGX 15 years ago, spun off and listed its financial arm, Yangzijiang Financial Holding, on the SGX main board.
Over the last two decades, we have also developed Asia’s largest global real estate investment trust network. And this is an area which we see ourselves playing a complementary role in China's development of its own REITS market.
We also see ourselves as a natural partner to China's internationalization. More than providing Chinese companies access to international capital, we also facilitate international fund flows into Chinese assets, such as equities and bonds, and promote the internationalization of the yuan.
Today, about 15 percent of bond issues on SGX come from Greater China with the further opening up of China's bond markets to global investors. As well as strong demand for sustainability bonds, I also see room for collaboration between SGX and China for bond listings, including green bonds.
Editor: Peter Thomas