Investing GIC funds ‘not the solution’ to boost SG equity market: minister

Photo credit: The Business Times

Directing GIC to invest in locally listed companies is “not the solution” to make Singapore’s equity market more attractive, as this would compromise the government’s intention in setting up the sovereign wealth fund, said Chee Hong Tat, the country’s second minister for finance.

This will not benefit Singapore and Singaporeans, added Chee, who was responding to a parliamentary question from Liang Eng Hwa, member of parliament for Bukit Panjang, earlier this week.

Liang had asked if the government would consider a suggestion from some industry players that GIC allocate part of its investments to securities listed on the Singapore Exchange (SGX) to help revitalize the bourse. GIC manages Singapore’s foreign reserves.

The issue of whether GIC should expand its portfolio to include the Singapore market resurfaced recently after Financial Times reported that SGX is reviewing proposals from the Singapore Venture and Private Capital Association to boost the local exchange.

Allowing pension and sovereign money to be invested in the stock market is one of the suggestions.

Market watchers have also told The Business Times that it is time to seriously consider investing GIC funds in the local stock market to boost valuations and investor confidence.

The calls for GIC to support the local scene come as other countries such as Japan and Australia have undertaken measures to boost their stock market.

For example, Japan’s Government Investment Pension Fund (GPIF) allocates part of its portfolio to Japanese bonds and equities. Australia’s sovereign wealth fund, Future Fund, invests in local equities as well.

However, GIC’s mandate is to preserve and enhance the international purchasing power of Singapore’s reserves, said Chee, who is also Singapore’s transport minister. The fund’s investments must aim to achieve good long-term returns.

“GIC must therefore continue to make professional investment decisions, and the government should not direct or interfere with GIC’s investment decisions,” stressed Chee.

GIC can already invest in appropriate Singapore companies if these have a global footprint and generate good returns, he added.

Chee thinks that having a pipeline of good companies listing on the SGX is a “more sustainable way” to develop the local equity market. The government will continue to groom and develop local companies with such potential. It will also continue to help SGX-listed companies expand overseas so that they become more attractive to global investors.

“The government remains open to new ideas and measures to improve our equity market and support business growth. We will continue to work with industry stakeholders on this goal,” said the minister.