Commentary: Razer chose to list in Hong Kong. Has Singapore lost its competitiveness?
A few high-profile companies have chosen to list in Hong Kong rather than Singapore. One NUS Business School observer discusses if there’s cause for concern and what Singapore can do to shore up its competitiveness.
SINGAPORE: When Singapore company Razer chose to list in Hong Kong in 2017, the news made regional headlines.
Razer’s listing followed not long after home-grown OSIM International had delisted from the Singapore Exchange and attempted to list on the Hong Kong Stock Exchange as V3 Group.
Whenever high-profile companies and organisations move out of Singapore as their places of business and choose a competing location, it is natural for many to wonder whether the city-state has lost its aura.
Indeed, has the country lost its competitiveness?
Many can still recall the spectacular merger a year earlier by Maersk Line, the world’s largest container shipping company, of its Hong Kong and Singapore offices. Maersk had then picked the former as its headquarters.
Just this year, the University of Chicago’s Booth School of Business completed its move from Singapore to Hong Kong with a new Asia campus to house its flagship executive MBA programme, which had run in Singapore for more than 15 years.
SINGAPORE CONTINUES TO DO WELL IN GLOBAL RANKINGS
By any yardstick, Singapore continues to do well in major global rankings.
In the Global Competitiveness Report 2017-2018 compiled by the renowned World Economic Forum, Singapore was ranked third in the world after Switzerland and United States but attained a top place in Asia. In another study by the IMD World Competitiveness Centre, Singapore was ranked third globally.
In more specialised studies, however, Singapore appears well ahead in the region. It was ranked top in the Asia-Pacific for the fifth straight year in the Global Talent Competitiveness Index released by INSEAD this April. Securing the second spot after Switzerland, it was the only Asia-Pacific country placed in the global top ten.
Singapore was also number one in the world in the Global Smart City Performance Index done by Juniper Research released in March, ahead of next-ranked London and New York.
FAIR SHARE OF BIG NAMES
Singapore still attracts and retains its fair line-up of regional headquarters of big companies like Apple, Bayer, Bridgestone, Chevron, Google, Hewlett Packard, Sony, Proctor & Gamble, and Unilever. Just last week, global healthcare giant Johnson & Johnson opened its Asia-Pacific headquarters in Singapore.
But the worry is naturally the perception that initial public offerings or IPOs are on the decline. These are new listings on a stock exchange that seek new financial capital through shares.
Looking at the bigger picture beyond Razer, the number of new listings has not declined in Singapore – this was 24 in 2017 compared to just 19 a year earlier. But there were comparatively more delistings of 27 in 2017 although this was a slight decline from the 30 in 2016.
However, these numbers pale in comparison with those in Hong Kong, which saw 174 new listings in 2017 and 126 in 2016, several fold larger than Singapore’s.
The race for new, big listings will remain intense. The famous Alibaba is an oft-quoted US$25 billion (S$33 billion) IPO that skipped Asia to list on the New York Stock Exchange. This enabled its unique governance arrangement to continue, whereby directors are appointed by a select group of top executives and investors, a feature prohibited even in Hong Kong.
Alibaba is reportedly considering double listing now in Hong Kong where the stock exchange has been set to amend rules on “dual-class shares” so as to allow the company to list there too.
Singapore likewise is on track to permit such listings through a liberalisation of its regulations which may well attract the next wave of Alibabas. The public consultation on the admission criteria and safeguards has just ended last month and implementation in the second half of this year looks likely.
New regional IPOs may drive the impetus to further liberalise Singapore’s financial markets. Xiaomi the Chinese smartphone maker has just filed for an IPO in Hong Kong. Expected to raise more than US$10 billion, it will be the world’s biggest IPO since Alibaba.
When OSIM relocated to Hong Kong, its founder Ron Sim lamented that its stock has not been fairly valued due to the lack of financial depth and liquidity in the Singapore exchange.
This is true if we look at the statistics. As at end-2017, the domestic market capitalisation for Singapore and Hong Kong were US$787 billion and US$4.35 trillion respectively – Hong Kong’s total share value is 5.5 times larger than that of Singapore.
More revealing is the average daily turnover value of shares – Hong Kong commanded US$7.96 billion as at end-2017 which is 9.4 times that of Singapore’s US$850 million.
PROXIMITY TO CONSUMER MARKETS A KEY CONSIDERATION
Beyond finances, proximity to large consumer markets is becoming a key consideration for IPOs. After being on the Singapore bourse for 16 years, OSIM decided on the move as it had 172 stores in mainland China and 35 in Hong Kong compared to only 26 in Singapore.
Likewise, Alibaba’s pre-dominant market is China. This may be a key factor in its consideration to also list in Hong Kong - to tap financiers who are familiar or involved with domestic markets and are thus more amenable to invest in its shares.
Singapore may lose out due to its distance to the big Chinese market and its large available pots of investor funding compared to Hong Kong or to even rising bourses like Shanghai and Shenzhen. This being so, it should reconstruct its unique selling point and redefine its relevance.
First, Singapore has the clear advantage of being an access point to the ASEAN market. Singapore needs to play this ASEAN trump suit.
Southeast Asia has a sizeable population of some 650 million, and a youthful one with a median age of 29 – compared to China’s median age of 37 even with its population of 1.4 billion.
ASEAN is also the world’s third largest market after China and India, and surpasses market blocs like the European Union.
Second, it is good that Singapore is strengthening its involvement in the Belt and Road Initiative (BRI), a huge market. Its coverage traverses across an inland Silk Road Economic Belt with multiple inter-country corridors as well as a Maritime Silk Road with several sea routes beyond Asia.
The BRI is envisaged to connect some 65 countries and 4.4 billion people which is almost 60 per cent of the world’s population; it will account for one-third of global GDP and one-third of world trade in goods and services.
In fact, total BRI investments at maturity are estimated at US$4 trillion which is 13 times Singapore’s GDP.
Third, Singapore must not shy away from China - the elephant in the room when it comes to competition for foreign companies. But China’s tremendous growth offers as much opportunity as it does competition.
The next thirty years is a period of opportunity, as China surges forward in its aim to become a fully developed country when it celebrates the 100th anniversary of the People’s Republic of China in 2049.
For now, Singapore will have to take a leaf from the book of Chinese idioms: Strike while the iron is hot. In other words, tap on the increased spending and liquidity the Chinese market potentially offers as its economy develops and incomes rise.
Singapore is not a sizeable market in itself. To thrive, it has to be a platform for the big markets.
Singapore’s sustained success for competitiveness is really in the “ABC” – A for ASEAN, B for BRI and C for China.
Lawrence Loh is deputy head and associate professor of Strategy and Policy at NUS Business School. He is also director of the Centre for Governance, Institutions and Organisations at the school.
Editor's Note: An earlier version of this commentary indicated that V3 had listed on the Hong Kong Stock Exchange. That is not correct.