Transcript: Singapore wants to shake up its stock market

This is an audio transcript of the FT News Briefing podcast episode: ‘Singapore wants to shake up its stock market’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, May 9th and this is your FT News Briefing.

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Investors are not happy with the UK chip designer Arm. And Canada expanded a major oil pipeline. To the surprise of no one, people are upset about it. Plus, Singapore is looking at ways to spruce up its stock market. I’m Marc Filippino and here’s the news you need to start your day.

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The UK chip designer Arm issued some pretty lacklustre revenue projections yesterday. It expects revenues this year of between $3.8bn and $4.1bn. Analysts had expected something in the middle. The disappointing figures made investors nervous that tech companies are slowing down their spending on artificial intelligence software. Arm shares dropped as much as 8 per cent in after-hours trading.

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Singapore has become an important financial hub, but its stock market is looking for a bit of a pick-me-up and it’s not the first time. The SGX, as it’s called, has been struggling for a while. Now the government is stepping in to give the exchange a boost. Here to talk to me about it is the FT’s Singapore correspondent Mercedes Ruehl. Hey, Mercedes.

Mercedes Ruehl
Hello.

Marc Filippino
So explain the problem to me. What are some of the challenges that Singapore’s stock market is facing?

Mercedes Ruehl
The problem for Singapore Exchange is quite unique. As global financial centres go, Singapore has risen exponentially as a business hub, as a commercial and finance hub in the region. But that hasn’t been matched with a rise in its exchange. And the problem is that the SGX, as it’s known as, has always struggled with liquidity and volumes. And these are kind of two key things you need to create a great environment for IPOs.

Marc Filippino
And how bad is this problem? The struggle with liquidity and volumes.

Mercedes Ruehl
So Singapore Exchange has actually tended to lag its peers, including not just south-east Asia but also Hong Kong. Tokyo has a much smaller market size, and it’s got a limited number of listed companies compared to some of those peers. Regional exchanges such as Thailand, Indonesia have actually done better in terms of serving up investors with liquidity and volumes. This is still the kind of magic sauce or kind of missing ingredient in that rise. And there’s a sense that if Singapore doesn’t act now, it’s going to fall further behind.

Marc Filippino
OK. So the government is looking to turn SGX around and get more companies interested in listing there. What are some of the proposals on the table?

Mercedes Ruehl
So the proposals have come from primarily the Singapore Venture & Private Capital Association, which are being considered by both the government and SGX. So, for example, among the proposals is mandating stock market participation from some of the record sums of private capital that have come into the city-state in the last few years. So there’s been a record number of new family offices, for instance, that this could be an avenue that they could tap. But there are also some more politically sensitive suggestions, such as allowing pension money and sovereign money to be invested into the stock market at a kind of broader, bigger level like as seen in Australia or Thailand. Those are kind of some of the, I guess, main examples.

Marc Filippino
So it sounds like the government is taking this pretty seriously. Do you think it will work this time? I mean, will investors and companies give SGX another look?

Mercedes Ruehl
It’s a really interesting question on whether this time will be different. And I think that’s definitely the sense I get when I talk to people is, are these ideas bold enough to actually make a difference? One of the criticisms that I hear is that there are still issues with board independence, things like diversity, transparency, disclosure standards. There have been some listings in companies in recent years where some of that has been kind of questionable. And that can have a big impact on investor confidence. So I think, as we know, this is not the first attempt by SGX to revive its stock market. You can go back 10 years and see attempts. It’ll be interesting, I think, to see if this one actually does work.

Marc Filippino
Mercedes Ruehl covers south-east Asia for the FT. Thanks, Mercedes.

Mercedes Ruehl
Thank you very much.

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Marc Filippino
The European Union announced yesterday that it figured out how to use billions of euros in profits from Russian assets. The money will go towards buying weapons for Ukraine. Western countries froze Russian central bank assets in 2022. About €190bn worth of them are sitting in a depository called Euroclear. The European Commission expects Euroclear to hand over about €3bn a year. Most of it will be used for military equipment, but about a 10th of it will go towards reconstructing Ukraine. Kyiv can expect its first payout from the profits in July.

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Do you remember the Keystone XL pipeline? It was supposed to transport crude oil from Canada to the US. But in 2021, President Joe Biden cancelled it because of pressure from environmentalists. That was a big blow to Canada. But this month, the country launched a new project that will carry even more oil. I’m joined now by the FT’s Jaren Kerr to discuss. Hi, Jaren.

Jaren Kerr
Hi, Marc. How are you?

Marc Filippino
I’m doing well. Thanks for joining us. So what happened to Canada’s oil industry after Biden cancelled the Keystone XL pipeline?

Jaren Kerr
I think the cancellation really sent a message to the oil and gas industry that if they wanted to basically get more money for their oil, it was really important that they complete another project. And that is the Trans Mountain pipeline expansion, which actually was proposed back in 2012, but it took over 12 years to finally build it.

Marc Filippino
Yeah. Tell me a little bit more about the expansion of this Trans Mountain pipeline. What are some of the details of it?

Jaren Kerr
So the Trans Mountain pipeline expansion was proposed by Kinder Morgan. The idea was to triple the capacity of oil that flows from Alberta to the west coast of British Columbia. For about six years, Kinder Morgan was leading this project and trying to build it out but they were facing permitting delays and lawsuits and protests, and they were really struggling to get the work done. And so when they were about to abandon it in 2018, Canada’s government stepped in and bought it. However, because of inflation and wildfires and supply chain issues, this pipeline — which was expected to cost about C$7bn to build — ended up costing C$34bn to build. But even with all the cost overruns and the challenges from both the legal perspective and from activists, the pipeline did launch in May and it’s flowing and producers are really excited about that.

Marc Filippino
Tell me why they’re so excited. What does the expansion of this pipeline mean for Canada’s oil industry?

Jaren Kerr
I think what it means is that there has been a secular issue of pipeline capacity limits in Canada, and storage capacity limits. And what that’s forced Canadian oil producers to do is sell oil at a major discount specifically to US crude. And that’s been great for refiners in the US but it’s been challenging for producers who feel like they deserve more for their oil. And so what this will do is triple the capacity of the pipeline from about 300,000 barrels a day to 890,000 barrels a day. And so that added capacity will get rid of sort of that bottleneck of crude and it will allow producers to sell more oil and for better prices.

Marc Filippino
OK. So good for prices, good for supply. But from an environmental standpoint, I got to imagine that there’s been pushback on this pipeline similar to the stuff that we saw against the Keystone XL pipeline. What are critics saying?

Jaren Kerr
Well, I think critics are saying this is coming at a time where we’re seeing a real renaissance in green energy. We’re seeing more nuclear, more wind, more solar, and we’re seeing the prices of that energy come down. And so the idea that we would invest in a pipeline that brings Canadian crude, particularly the oil sands — that’s some of, frankly, the dirtiest crude in the world, if you look at the extraction process — a lot of critics are saying not only is this bad for the environment but we have better alternatives. And of course, because of where this pipeline goes, from Edmonton, Alberta to the coast of BC, British Columbia, there’s a lot of indigenous groups that have this pipeline going through their communities. They’re naturally worried about oil spills and leaks. There’s been a lot of protests in that area from both environmentalists and indigenous groups, and there’s a lot of overlap between those two communities.

Marc Filippino
Jaren Kerr covers breaking news in Canada for the FT. Thanks, Jaren.

Jaren Kerr
Thanks, Marc.

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Marc Filippino
Before we go, the UK Supreme Court has ruled on the age-old saying finders keepers — turns out they’re not. A British salvage company called Argentum Exploration found $43mn worth of silver in a World War II shipwreck in the Indian Ocean. South Africa owned the silver back then and the country says it deserves it now. The country took the issue to court, which ruled in its favour. But Argentum in South Africa have apparently reached an undisclosed settlement so it’s really anyone’s guess where the treasure will land.

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You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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