Singapore’s stock market is facing a difficult period, with the number of listed companies on the Singapore Exchange (SGX) reaching a 20-year low in 2024. Only four companies went public this year, while several others delisted. This decline is in stark contrast to Japan’s Nikkei 225, which is closing in on record highs not seen since the 1980s. By looking at what has worked for Japan, Singapore might find ways to reverse its fortunes.
Japan’s Stock Market Comeback
Japan’s Nikkei 225 index is finishing 2024 on a high, closing its penultimate trading session at 40,281 points—a 1.8% rise led by companies such as Toyota, Sony, and Fast Retailing. For the first time in 35 years, the index has exceeded its bubble-era highs, thanks to corporate reforms, share buybacks, and growing investor confidence. Shareholder activism has also reached new levels, pushing companies to operate more efficiently and transparently.
Although foreign investors historically drive Japan’s market, this year’s rally has been primarily led by domestic forces. Foreign investors sold about $32 billion worth of Japanese stocks in 2024, yet the market rose more than 21%—a testament to the strength of internal reforms. Government policies encouraging households to shift savings into equities, including the expansion of tax-advantaged Nippon Individual Savings Accounts, have also been instrumental.
Singapore’s Struggles
Meanwhile, Singapore’s stock market has seen fewer companies listing, with the total number falling to 617 in October 2024—the lowest since 2004. The four companies that went public this year collectively raised just $31 million, and all were listed on SGX’s junior Catalist board. Many domestic companies, such as Grab and Sea, have opted for overseas markets like New York, drawn by higher valuations and greater liquidity.
Turnover velocity at the SGX—a measure of trading activity—stood at just 36% in 2023, well below Japan’s 103.6%. This lack of liquidity makes Singapore’s market less attractive to both investors and companies considering an initial public offering (IPO). Despite this, the Monetary Authority of Singapore (MAS) and other stakeholders are reviewing ways to reverse the decline, with proposals expected in 2025.
What Singapore Can Learn from Japan
Japan’s resurgence offers valuable lessons for Singapore. One major factor in Japan’s success has been its “value-up” programmes, which pushed companies to improve corporate governance and increase shareholder returns. These reforms helped reduce the proportion of stocks trading below book value, signalling increased investor confidence. Singapore could explore similar reforms, particularly as around 67% of SGX stocks are currently trading below book value.
Investor engagement is another area where Singapore could improve. Analysts recommend that companies increase outreach efforts, such as holding more investor relations meetings and roadshows. These activities could help smaller and mid-sized companies attract attention from investors and analysts, addressing the long-standing issue of low valuations and trading volumes.
Singapore’s regulators might also consider offering tax incentives or reduced listing fees for companies that improve their market performance. However, experts warn that these measures will only succeed if combined with broader efforts to attract high-quality listings and boost overall market liquidity.
Boosting Domestic Participation
One potential solution involves using Singapore’s Central Provident Fund (CPF), a compulsory savings scheme, to invest more in the local stock market. This could create a significant pool of capital to support IPOs and drive up valuations. However, such a move would likely require policy changes and public support. Japan has also demonstrated the effectiveness of tax-advantaged savings accounts in encouraging retail investment. Since the expansion of Nippon Individual Savings Accounts, Japanese households have been more willing to invest in equities. A similar initiative in Singapore could help increase retail participation in the market.
A Path Forward
Singapore’s challenges are not insurmountable. The MAS and other stakeholders, including the SGX and the Economic Development Board, are actively exploring solutions. Industry leaders such as DBS have expressed optimism about a stronger IPO pipeline in 2025, signalling the potential for a turnaround.
Still, there is no single fix for Singapore’s stock market. Japan’s recovery took years of consistent reforms and a coordinated effort among regulators, companies, and investors. Singapore will need to take a similarly holistic approach, focusing on reforms that boost investor confidence, improve corporate transparency, and deepen market liquidity.
While the road ahead may be challenging, Japan’s example demonstrates that recovery is possible. With the right mix of policies and reforms, Singapore can position itself once again as a vibrant hub for equity markets.