Singapore is facing structural challenges in developing a vibrant domestic capital market that supports the growth of younger, high-potential companies, according to Koh Boon Hwee, chairman of the Singapore Exchange (SGX). Speaking at the Forbes Global CEO Conference on October 8, Koh highlighted a gap between the willingness of local investors to take risks on overseas growth stocks and their reluctance to back similar companies within Singapore’s equity market.

Koh noted that while Singaporean investors, particularly younger ones, are prepared to invest in volatile foreign stocks such as Tesla and loss-making ventures like SpaceX, the domestic market lacks the sustained demand and liquidity required to encourage comparable risk-taking locally. This has resulted in many recent initial public offerings (IPOs) on the SGX struggling to gain traction among investors. “Right now it’s unlikely [they would back similar businesses on SGX] because they understand the constraints here as well,” Koh said.

The limited circulation of capital within Singapore’s equity markets means early-stage investors who back start-ups domestically have fewer opportunities to realise returns and recycle funds into new ventures. As a result, prominent Singapore-founded companies have frequently pursued overseas listings to meet investor expectations and access larger pools of capital. Sea, the parent company of e-commerce platform Shopee and gaming firm Garena, listed on the New York Stock Exchange in 2017. Similarly, Grab went public on Nasdaq in 2021 via a merger with a special purpose acquisition company, while data centre operator DayOne recently filed for a proposed Nasdaq IPO.

Koh underscored that Singapore’s market needs to develop an ecosystem that encourages local recycling of capital and supports younger enterprises—key drivers of economic growth. Without such support, Singapore risks losing emerging companies to foreign exchanges, leaving the domestic capital cycle fragmented. He warned that relying heavily on established sectors such as banking, property, and real estate investment trusts could limit economic dynamism in an increasingly fragmented global environment where countries seek self-reliance. “The larger established companies become, the harder it is for the compound growth at high rates,” he explained, adding that nurturing start-ups with visibility into consumer demand and proprietary brands is crucial to generating sustained growth.

To address these issues, the Singapore government has taken steps such as allocating S$6.5 billion to the equity market through the Equity Market Development Programme (EQDP). While Koh lauded this initiative, he described it as a “stochastic injection” rather than a natural, ongoing flow of capital. He contrasted Singapore’s situation with countries like the United States, where independent pension funds provide continual demand within public markets, venture capital, and private equity, creating a sustainable capital recycling mechanism. Koh cautioned that without regular demand creation, maintaining liquidity and proper market valuation remains difficult.

In summary, the development of Singapore’s capital markets hinges on fostering sustainable investor appetite for local growth enterprises and enabling a circular flow of capital. Doing so would enhance the ability of homegrown companies to scale and contribute to the economy, helping to avoid prolonged periods of economic stagnation driven by overreliance on entrenched sectors.