Poor liquidity? Share 3-5 year plan with investors, Koh Boon Hwee urges listco chairs

[SINGAPORE] Board chairs of companies listed on the Singapore Exchange (SGX) must tell the public where they plan to take the company over the next three to five years, and how they intend to get there, said SGX chairman Koh Boon Hwee at the Singapore Institute of Directors (SID) Chairpersons Guild Forum on Thursday (Oct 1).

“The exchange itself doesn’t create liquidity, because we neither create certain demand nor supply,” he said, adding it cannot communicate on behalf of companies or guarantee that any particular counter will be liquid.

“Therefore, it is incumbent upon the companies to communicate to the shareholding public.”

Companies that feel misunderstood by the market must take responsibility for explaining themselves, he added.

“If you say that there is no liquidity, it is because you have not been talking to the people who might have an interest in buying or demanding the stock,” said Koh.

He acknowledged that liquidity also depends on the broader market ecosystem. Government policy is aimed at building up local asset managers whose mandates cover at least some SGX-listed companies, giving them greater reason to pay attention to those stocks.

But companies still have to articulate their plans clearly, he said.

“If the public doesn’t know what you are planning to do over the next three to five years, why would they buy your stock?” he said. “If you can’t tell the public what is going to happen to your company over the next three to five years, how can they tell?”

Koh made these points at a fireside chat with Emily Poon, CEO of SID, at the forum. He was asked what board chairs could do differently to show investors their companies’ value.

The forum brought together chairs of SGX-listed companies and fund managers under the Equity Market Development Programme (EQDP) by the Monetary Authority of Singapore (MAS). They discussed how boards and leadership teams can unlock enterprise value, and what investors look for in sustainable value creation.

What has changed in the market

During the fireside chat, Poon indicated encouraging signs in Singapore’s equity market. She noted that MAS announced the third batch of EQDP fund managers earlier this week, aimed at bringing in more international capital, and the Straits Times Index crossed 5,800 for the first time last month.

She then asked Koh what genuinely changed in the market, and what still needed to change before a chair of a small or mid-cap company could say it was a better market for them.

He said indices around the world have been rising, adding that “a rising tide lifts all boats”.

The second factor, he said, was the government’s attention to issues – in particular, the formation of the Equity Markets Review Group. This sent a strong signal that Singapore was serious about examining the policies and regulations governing its capital market.

“The market has given the benefit of doubt that this is a good start,” he said.

Earlier in the forum, during his opening remarks, he urged chairs to look well beyond the next market cycle. He said the role of a company chair, based on his own experience, was to work with executive management to establish a vision for what the company should look like 10 to 20 years down the road.

“If you can see where you are headed, you will be able to take the steps to get there,” said Koh, who sits on the boards of and holds leadership roles in public and private-sector organisations.

He added that Singapore and its companies have significant opportunities amid the fragmentation of the geopolitical landscape.

“I am an eternal optimist, so that influences the way I look at things,” Koh said. “But if we make ourselves relevant to all the superpowers that are rising or contending to maintain their position, it will give us much greater opportunities.”

In this difficult period, he said, everyone should seize the moment, as there is no better time for Singapore companies to set a vision.

He stressed that numerical metrics matter, but boards must give equal attention to factors that are harder to measure, such as corporate culture.

The compliance mentality is a function of the company culture – especially in businesses that are highly regulated – and not a function of measuring how many incidents have taken place, he said.

“The board sets the culture together with the executive management team… It sets the tone, a degree of tolerance and risk that the whole corporation is willing to take.”