DIRECTING Singapore’s sovereign wealth fund, GIC, to invest in locally listed companies is “not the solution” to improve the attractiveness of the Republic’s equity market, as doing so will compromise the government’s objectives for setting up GIC.
This will not benefit Singapore and Singaporeans, said Chee Hong Tat, Second Minister for Finance, in Parliament on Tuesday (Jul 2).
He was responding to a parliamentary question by Liang Eng Hwa, Member of Parliament for Bukit Panjang Single-Member Constituency.
Liang had wanted to know if the government would consider the suggestion from some industry players for GIC to allocate part of its investments to securities listed on the Singapore Exchange (SGX) to revitalise the country’s stock exchange. GIC manages Singapore’s foreign reserves.
The conversation over whether GIC should expand its portfolio to include the Singapore market resurfaced recently after Financial Times reported 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.
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Market watchers had also told The Business Times that it is time to seriously consider the use of GIC funds for investments in the local stock market to boost valuations and investor confidence.
Chee, who is also the transport minister, said that GIC’s mandate is to preserve and enhance the international purchasing power of Singapore’s reserves.
In this regard, GIC’s investment decisions must aim to achieve good long-term returns for Singapore.
“GIC must therefore continue to make professional investment decisions, and the government should not direct or interfere with GIC’s investment decisions,” said Chee, who was maintaining a longstanding view held by the government.
He noted that GIC can already invest in appropriate Singapore companies if these companies have a global footprint and generate good returns to its portfolio.
Chee said that a “more sustainable way” to develop the local equity market is to have a pipeline of good companies to list on the SGX.
To this end, the government will continue to groom and develop local companies with the potential to list locally.
It will also help SGX-listed companies expand overseas so that they will become more attractive to global investors, he said.
“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.
In a supplementary question, Liang also asked how Singapore’s investment agencies such as GIC, Temasek and the Monetary Authority of Singapore, can help to strengthen the nation’s status as a premier financial centre given the scale and sophistication of their investments.
To this, Chee said that Singapore’s financial sector, as a whole, is doing well. For instance, it is the largest foreign exchange centre in the Asia-Pacific. SGX is also one of the largest bond-listing venues in Asia.
Nevertheless, the minister said the government recognised that more can be done to grow the local equity market segment, and reiterated that it is working closely with the industry to do so.
He said that the government’s investment entities such as Temasek and GIC do invest locally.
“But I think there’s a difference between asking them to make those investment decisions based on returns and what is in their best interests for shareholders (who) are Singaporeans, ultimately, versus we (the government) give them a directive to invest locally,” he said.
Non-constituency MP Leong Mun Wai also asked in a supplementary question if the government has “an integrated plan” in mind to revive the equity market.
To this, Chee said that the government has plans to work with industry partners to see how it can do so, and added that some of these plans are more viable and sustainable than others.
