Source of article: The Business Times

In summary:

Japan Exchange’s regime to “name and shame” to boost corporate valuations and to improve governance is novel. It would however be a rather blunt regulatory instrument to foster compliance. It may have the untoward effect of engendering short-termism, or cosmetic buffing by corporate managers and their Boards at the expense of strategic, concrete, and sustainable action plans that would be in the company’s long-term interests. The intense pressure not to be “black-listed” may also inadvertently lead to companies making mis-leading announcements to please all and sundry and the consequential creation of a false market. This is a Pandora’s Box that can morph from an otherwise well-intentioned objective to uplift valuations and improve corporate governance and communications with shareholders.

The Singapore Exchange’s policy is presently two-fold for regulatory compliance. Issuers that have been duly complying with listing rules and with good corporate governance track records are put on fast-track for expeditious clearance of their applications to the Exchange for regulatory approval. Companies which have been tardy in compliance can expect a longer time to receive regulatory clearance.

Singapore Mainboard issuers that (i) record audited pre-tax losses for the three most recently completed consecutive financial years and an average daily market capitalisation of less than SGD 40 million over the last 6 months; or (ii) record a volume-weighted average price of less than SGD 0.20 over the last 6 months, will be placed on a watch-list. The raison d’etre for the watch-list are (i) to instil discipline in Mainboard issuers to administer their financial and share price performance for continued compliance with the listing rules; and (ii) to alert investors to the risk of investing in companies that may face delisting. Mainboard issuers that are placed on a watch list are in fact being publicly “singled-out” for having performed poorly over a reasonable period of time. This may be a better way to nudge poor performers to shape up or ship out without the collateral effect of inadvertently encouraging short-termism and other ill-advised market conduct that may lead to the creation of a false market.   
The Singapore Exchange and the government should do more to invest and promote the growth and a more rapid development of a larger pool of market research professionals and analysts to address the perception that companies listed on the Singapore bourse suffer poor valuations and face low liquidity. The Singapore Exchange should also increase its services to enable companies in new growth industries to tap the capital market more expeditiously via the listing of digital commercial paper. These are constructive solutions that can better invigorate the Singapore market in the longer term.

I shared my views in the attached story published by the Singapore Business Times on 24 October 2023.

My post on LinkedIn is here