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Recent Trends in Global Capital Markets

Role of Singapore Exchange in the regional economy

Swee TianANG
THE development of capita) markets is an important aspect of any modem economy. The direct correlation observed in economic development and the state of capital markets in many countries across the globe Is telling that they progress In tandem. As the world becomes more integrated, capital markets play a critical role not just in providing liquidity and investment instruments, but also in maln-tainingglobal financial stability.
Therefore, building a thriving and healthy capital markets characterised by a robust regulatory and institutional framework, as well as efficient infrastructure for public information and trading/settlement remains a key priority globally. In particular, much emphasis has been placed on Improving integrity of the marketplace through enhancing corporategovemance standards.
SGX has helped create growth in recentyears
Along with the rest of the financial sectors, the global capital markets suffered tumultuous times during the Asian financial crisis In 1997, the burst of the dotcom bubble In 2000, and the aftermath of the terrorist attacks on the US in 2001. Recovery in the major global economies set the industry on a rally in 2002, which continued into 2003 where debt and equity underwriting experienced solid activity. Gtpital market's activity was further strengthened as International equity marketsputona generally healthy showing during 2004.
It was estimated by Mckjnsey & Company that the total value of the global capital markets Including bank deposits, government and private debt securities, and equities stood at US$119 trillion at the end of 200-1. While this value is projected to grow beyond US$200 triton by 2010, guarded optimism shapes environment for2005 since potential disruptions such as the stubbornly high oQ prices loom in the background.
In terms of market segmentation, the leading sector within the capital markets Is bonds outstanding which accounts for about -13% of the global value. Bank deposits and equity securities account for the remaining 30% and 27% respectively. Geographically, the US continues id
do minaie the market value, taking a share of about 37%. Europe is the second largest region with 31%, and Is gaining strength through integration. Asia is a region made up of markets of vastly different sizes, with Japan dominating two thirds of the region's capital markets, and China and India driving growth.
Global IPO jumped sharply in 2004. rougiily doubling over 2003 in transaction numbers and even more than that in dollars raised. In total, 1516 deals were concluded, raising US$124 billion. While North America and Europe reasserted themselves in the IPO scene, the centre of gravity continues to shift towards emerging economies such as China. India. Russia and Israel. The thirst for
capital in these emerging markets has attracted increasing competition front many international stock exchanges, and has thus given rise to the number ofcross-border listings.
SGX as the Asian Gateway attracts foreign listings Singapore is located at the heart of the exciting growth story of Asia, where there are tremendous investment needs. Companies within Asia are also fast expanding overseas, and capital is often a critical success factor. Against such a backdrop, SGX has been able to contribute by providing a platform for capital raising, and at the same benefit from it Last year alone, 48 foreign companies were listed on SGX For the first time last year, the number of foreign companies surpasses that of the local companies. On the whole, out of the 665 companies currently listed on SGX 28% are foreign, making up 40% of the market capitalisation. Such receptivity to foreign companies is a unique feature of Singapore market which foreign companies find comfort in when chooslngtolistonSGX
In2004, the Singapore bond mar-
kets saw the largest number of foreign Issuers at 34, raising a total of SS3.5 billion. This included not only corporates anti financial institutions such as General Electric and Citigroup, but also supranationals such as the Asian Development Bank (ADB) and U.S. Agencies like Fannie Mae.
Beyond raising capital, both Multi-National Corporations (MNCs) and smaller companies alike have found Singapore conducive for conducting business operations in areas like manufacturing, research S< development, and distribution & logistics. Out of the 7000 MNCs located in Singapore, many have established their regional Headquarters here. Titis powerful MNC network, coupled with Singapore's extensive network of Free Trade Agreements (FTAs) and Double Tax Avoidance Agreements (DTAAs) must have helped attract the 1100 Chinese companies and 1500 Indian companies that currently have operations here.
SGE strives to build capital markets through partnerships
SGX recognises the positive effects of exchange networks and by leveraging on its strengths in Asia, we are proactively forging alliances with likeminded institutions. On the securities front. SGX is currently in active discussion with Bursa Malaysia to establish a co-tradlng linkage similar to the one it had forged with lYustralian Stock Exchange a few yearsago.
Wb have also participated in a joint collaboration with four other ASEAN stock exchanges - Indonesia, Malaysia. Philippines and Thailand -to create an index of ASEAN stocks, which will be launched soon. It will be a tradable index that comprises many top names, and will fadlitate the creation of exchange-traded products such as fluids and futures targeted at investors who recognise the economic and investment prospects ofASEAN.
Ihrough all these, we hope to pare the way for stronger growth in financial services activities between Singapore and our partners, to promote better market access and to enhance cross border flows of capital
SWM TUn ARG Is PresWsnt. Singapore ExthangsUd. . , ,