How GIC can turn SGX’s slump around

As debate over the need for a revitalization of the Singapore Exchange (SGX) heats up, most market watchers that spoke with The Business Times believe it is time to “think out of the box” and seriously consider the use of GIC funds for investments in the local stock market.

Some analysts said a small portion of the sovereign wealth fund could be allocated to the local bourse to boost valuations and investor confidence, although at least one felt that there was no need to do so.

To be clear, it is not the first time that market observers have called for funds from GIC – which manages Singapore’s foreign reserves – to be used to lift the stock market’s flagging fortunes.

The Singapore Business Federation raised the topic in 2016, while The Society of Remisiers (Singapore) suggested it earlier this year.

Photo credit: tang90246 / 123RF

The conversation over whether GIC should expand its portfolio to include the Singapore market resurfaced again after the Financial Times reported last week that SGX is reviewing a document by the Singapore Venture and Private Capital Association that puts forth several proposals to boost the local bourse.

According to the report, one of the proposals is to allow pension and sovereign money to be invested in the stock market.

Two of Singapore’s investment entities – GIC and Temasek – invest their funds into markets, but in different portfolios.

While Temasek’s portfolio includes local listed companies, GIC’s investments are for firms outside Singapore. This is in line with its mandate to preserve and enhance the international purchasing power of the Singapore reserves it manages over the long term.

One of the sources of funds managed by GIC is the proceeds from the Special Singapore Government Securities, in which funding from the Central Provident Fund (CPF) is invested.

Why reconsider now?

RHB analyst Vijay Natarajan said that while Singapore’s gross domestic product has grown “significantly better” than other markets since GIC was set up in 1981, the local stock market has not grown in the same size and vibrancy.

“And that is where I think the opportunity comes, because GIC knows this market better,” said Natarajan.

Photo credit: Tech in Asia

Moving the needle with GIC funds