SINGAPORE (BLOOMBERG) - Singapore Exchange chief executive officer Loh Boon Chye says his top priority is to restore confidence in South-east Asia's biggest stock market, where turnover is yet to recover from a mystery penny-stock crash more than two years ago.
Since taking the helm in July, Mr Loh has been discussing "to-do lists" from investors, brokers and listed companies that want him to revive interest in equities, he said in an interview this week at SGX's headquarters.
His predecessor Magnus Bocker drew criticism for focusing on his derivatives business while investors and stockbrokers suffered an unexplained freefall in three commodity companies in 2013 that wiped out US$6.9 billion (S$9.63 billion) in market value.
"I like challenges," said Mr Loh, a veteran banker who used to run Asia-Pacific global markets for Bank of America. Even though the penny-stock slump happened well before his tenure, he is so aware of the fallout that he has an acronym to describe it: ABL, the initials of the companies that plunged.
"These are things that are out there and that clearly has a dent on confidence in trading," he said. "We need to overcome that."
The value of shares traded in Singapore increased 11 per cent to a daily average of S$1.16 billion this year from the same part of 2014 as the exchange allowed trading in smaller chunks to attract individual investors. That's still about 25 per cent lower than in 2013 before the penny-stock crash.
Partly because of the trading lull, companies have looked elsewhere to list. SGX hosted seven initial public offerings worth S$103.9 million in the September quarter, down from S$1.9 billion a year earlier.
"Singapore is a small city-state so it's never going to be up there with Wall Street or Shanghai," said Mr Shane Oliver, Sydney-based global strategist at AMP Capital Investors, which manages about US$112 billion. "It's making sure that the country remains innovative, corporate governance remains high and capital can flow freely. That will keep investors on its side over time."
Mr Loh, 51, says SGX is working on a bond-trading platform that will make it a more attractive place for companies to raise money. The facility will allow companies to sell bonds in smaller amounts instead of "multi-hundred million" dollars each time, helping to create efficiencies, he said.
"This was really designed with a steering group - buy side, sell side, existing banks," he said. "It's better to have a system to now be embraced by the users, then you have a greater chance of getting the liquidity."
He also plans to add currency products and last month started a customised index service in a move to help diversify revenue for SGX. The exchange's derivatives and equities business accounted for 41 per cent and 25 per cent of its most recent quarterly revenue, respectively.
"If you want to talk about scale, that's clearly one of our challenges," he said. "There's a broader value proposition. Yes, we would like more IPOs but fund raising is also about debt."
Banks and brokers have sued to recover at least US$230 million from the stock rout which led to the city's largest securities-fraud probe. The investigation continues and the authorities have said they're "sparing no effort" to bring culprits to justice.
Deutsche Boerse and Bats Global Markets are also among bourses challenging the dominance of banks in the global currency market. CME Group has said its foreign-exchange futures are growing in popularity after banks paid billions of dollars to settle claims of currency rigging.
Mr Bocker, who led SGX for more than five years, didn't seek to extend his contract after a petition signed by more than 500 people sought to remove him as chief. SGX shares slipped 0.4 per cent during his tenure, versus a 21 per cent advance for the benchmark Straits Times Index.
Since Mr Loh started, the exchange operator has fallen 11 per cent as the equity gauge sank 9.4 per cent. Analysts tracked by Bloomberg are the most bullish on the stock since 2011.
"I hope to make a difference. It's a high-profile job, I get that," Mr Loh said. "I walked into this job knowing that."