Why SGX Delistings May Accelerate Despite Regulatory Reforms—and How Investors Should Adapt

The Singapore Exchange (SGX) has embarked on a bold regulatory overhaul, mandating stricter sustainability disclosures and sustainability reporting frameworks. Yet, behind this veneer of progress lies a stark reality: delistings are rising faster than new listings, and structural liquidity deficits and valuation gaps threaten to undermine the market’s long-term health. For investors, this is not just a cautionary tale—it’s a call to pivot strategies before it’s too late.

The Regulatory Paradox: More Rules, More Delistings

The SGX’s new disclosure-based regime, effective from 2025, requires companies to report Scope 1 and 2 emissions and gradually expand to Scope 3. While these rules align with global standards, they add complexity to smaller firms already grappling with liquidity shortages and undervaluation. The result? A paradox: regulatory rigor is accelerating delistings, not preventing them.

Consider the timeline:
- By January 2025, all listed issuers must disclose Scope 1/2 emissions.
- By 2026, larger firms must report Scope 3 emissions.

But here’s the catch: small- and mid-cap firms lack the resources to comply with these demands, especially those in sectors like real estate (e.g., Paragon Reit) or manufacturing (e.g., Sinarmas Land). The cost of compliance—both financial and operational—has become a burden that many cannot bear.

Case Studies: When Valuation Gaps and Liquidity Collide

The delisting wave is already here. Take Ban Leong Technologies, a gaming hardware distributor that received a privatization offer at a 60.8% premium to its trading price. Its shares had languished due to thin liquidity and undervaluation, despite its robust Southeast Asian e-commerce footprint. Similarly, Japfa, a food conglomerate, chose privatization to escape persistent trading volumes that failed to reflect its operational strengths.

The pattern is clear: small/mid-cap firms are caught in a liquidity trap. Their shares trade at discounts to private valuations, and compliance costs loom large. Even sectors like real estate—once SGX darlings—now face delistings as investors flee to safer assets.

The MAS’s $5B EQDP: A Band-Aid on a Structural Wound

The Monetary Authority of Singapore’s Equity Market Development Programme (EQDP) aims to boost liquidity via tax rebates and co-investment with fund managers. But its flaws are glaring:
- No Sovereign Backstop: Unlike Japan’s BOJ or Hong Kong’s HKMA, which directly invest in equities, the MAS avoids market distortions but leaves smaller firms without a safety net.
- Tax Rebate Caps: Limits on incentives (e.g., S$6M/year for large firms) fail to attract the largest players, while mid-caps remain underserved.
- Global Fund Deterrence: Requirements to allocate 30% of capital to Singapore equities clash with low market sentiment.

The Investor’s Dilemma: Adapt or Retreat

The writing is on the wall: SGX’s structural flaws will outpace regulatory fixes. Investors must act now to avoid losses. Here’s how:

1. Avoid Mid/Small-Caps: Firms in sectors like tech (Procurri Corp), real estate (Sinarmas Land), and manufacturing face existential risks. Their valuations are already discounted, and delisting pressures are rising.

2. Prioritize Defensive Sectors: Utilities, infrastructure, and healthcare—sectors with stable cash flows—are less vulnerable to liquidity shocks. For example, CapitaLand Investment, despite recent dips, offers dividend stability amid volatility.

3. Look Overseas: Hong Kong, London, and NASDAQ offer deeper liquidity and better valuations for growth stocks. The privatization of Ban Leong to a Nasdaq-listed firm (GCL Global) highlights this trend.

Conclusion: The SGX Crossroads

The SGX’s new rules aim to align with global standards, but they ignore the market’s core weaknesses: chronic illiquidity and valuation gaps. Delistings will keep rising unless the MAS adopts a sovereign-backed liquidity backstop and mandates captive domestic capital. Until then, investors must pivot to safer havens or risk being left holding undervalued, soon-to-be-delisted shares.

The clock is ticking. Act now.