Loh Boon Chye, CEO, Singapore Exchange (SGX): Interview

Loh Boon Chye, CEO, Singapore Exchange (SGX)

Interview: Loh Boon Chye

How will the Indonesia Stock Exchange (IDX) develop compared to other exchanges in the region?

LOH BOON CHYE: Indonesia’s robust economic fundamentals, including the size of its economy and growing urbanisation and middle class, place it in good stead among ASEAN peers. The IDX plays an important role in the country’s economic development. The Jakarta Composite Index has seen strong growth, more than 10% year-on-year by mid-2017, while the IDX looks set to welcome more initial public offerings (IPOs). In the medium term the activity among technology and fintech start-ups in ASEAN bodes well for the region’s IPO pipeline.

For exchanges in the region the challenge is to continue innovating and providing entrepreneurs and businesses with the opportunities to access the capital they need to grow, expand and invest. The region will benefit if they can tap regional capital markets efficiently, and allow both institutional and retail investors to participate in their growth. The benefits of collaboration across exchanges should far outweigh concerns of competition. Singapore and Indonesia celebrate 50 years of diplomatic ties in 2017. Singapore’s open economy and close relationship with neighbours allow SGX to benefit from the growth of neighbouring economies and peers. Similarly, SGX welcomes the growth of Indonesia and the IDX.

What sectors of the Indonesian economy are of most importance to the SGX?

LOH: Indonesian companies in the consumer, real estate and energy sectors have always been particularly attractive to investors in the Singapore market. These sectors will continue to be of interest in the years to come. As of the end of August 2017 there were 26 Indonesian companies listed on the SGX, with a combined market capitalisation of nearly $15bn. Leading the pack are two palm oil producers that have grown more than four times and two times, respectively, since their listing, to a combined market capitalisation of nearly $6bn as at August 2017. In the consumer sector we have a well-known Indonesian company retailing consumer brands that are familiar household names in Singapore. An Indonesian homegrown agri-food company also tapped Singapore’s capital markets to fund its expansion. On the real estate investment trust (REIT) front, SGX welcomed Singapore’s first health care REIT, sponsored by Indonesia’s largest broad-based listed property company. With infrastructure being one of Indonesia’s key development priorities, we see this sector as an area with immense potential.

What opportunities does Indonesia’s need for infrastructure financing create for capital markets?

LOH: Capital markets can be powerful for financing infrastructure projects. In recent years Indonesia has put in place an institutional framework to support its infrastructure plans. SGX is well established in the ecosystem to integrate infrastructure players along the whole value chain. There is opportunity to develop infrastructure finance as an asset class, equivalent to the REIT market, within a well-regulated and transparent ecosystem. We would like to be a valued partner of the IDX in meeting Indonesia’s infrastructure financing needs. Collaboration can be in the form of knowledge sharing or formulating propositions for obtaining financing in both markets concurrently.

SGX’s established global REIT platform is a potential avenue for Indonesia asset owners to securitise their income-producing infrastructure assets. Since the establishment of REITs in Singapore in 2002 SGX’s REIT and business trust sectors have grown to 50 listings and have a combined market capitalisation of close to $80bn. Indonesia-listed companies that are looking to gain access to new pools of liquidity and investors could explore the possibility of a secondary equity listing or bond issuance in Singapore. SGX has more than 2400 debt securities listed by over 800 issuers from more than 40 countries worldwide, in 19 different currencies.

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The Report: Indonesia 2018

Capital Markets chapter from The Report: Indonesia 2018

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