The IPO fixes in Singapore’s Budget 2025 are the clearest indication yet of defeat

Singapore’s Budget 2025 makes a clear attempt to address one of the most pressing yet often overlooked economic issues: The decline of its capital markets. The introduction of tax incentives for locally listed companies and fund managers investing in SGX equities is meant to breathe new life into the Singapore Exchange, which has struggled to attract IPOs in recent years.

Still, this is not nearly enough to move the needle. Hardly.

The government’s gestures toward revitalising Singapore’s IPO market are, at best, incremental. At worst, they may be a tacit admission that SGX’s problems are too deeply entrenched for mere tax breaks to fix. The reality is that Singapore’s IPO market is suffering from structural and cultural issues that run deeper than taxation, and unless fundamental changes are made, the SGX will continue its slide into irrelevance.

For the better part of two decades, SGX has been losing ground to more dynamic capital markets. The writing has been on the wall for some time. Singapore’s biggest success stories — Grab, Sea (Shopee’s parent company), and Razer — chose to list elsewhere.

Grab went to Nasdaq, Sea to the NYSE, and Razer to HKEX. Foreign companies, once a major source of SGX IPOs, have all but disappeared. The days when SGX could attract Chinese listings are long gone, with companies now preferring Hong Kong or New York. 

This decline is part of a longer trend. In 2013, SGX had 782 listed companies. By 2024, that number had fallen to 617 — the lowest in two decades. And the drop in IPOs has been even more drastic: In 2023, SGX saw just seven IPOs, raising a total of US$30 million ($40.25 million), far below the levels seen even five years ago. Since then, Singapore’s stock market has been dominated by REITs, banks, and traditional industrial firms, making it less appealing to tech-focused investors.

This slump is not temporary. Rather, it is a long-term decline in SGX’s relevance as a listing destination. The government’s solution to this is tax incentives. But this fails to address the real reasons companies are avoiding SGX.

The structural barriers tax incentives won’t fix

Singapore has long been known for its rigorous corporate governance standards — a strength in many areas, but a liability when it comes to attracting IPOs. SGX’s strict listing requirements, compliance costs, and risk of delisting make it an unfriendly exchange for high-growth companies.

It has a zero-tolerance approach to non-compliance, leading to companies being swiftly delisted if they fail to meet trading volume or governance standards. The threat of regulatory scrutiny discourages companies from listing locally, particularly those that are still scaling and cannot afford extensive compliance costs. 

In contrast, Nasdaq and HKEX have more flexible listing rules, making them more attractive to companies looking to go public.

And even when companies do list, the market’s lack of liquidity discourages long-term growth. SGX is caught in a negative feedback loop: Fewer IPOs lead to lower trading volumes, which reduces investor interest, which in turn discourages even more IPOs. 

Institutional and retail investors also prefer dividend-yielding stocks like REITs, leaving growth stocks underwhelmingly valued. A lack of liquidity means that even when companies do list on SGX, they struggle with low trading volume, making it hard to raise follow-on capital. 

Nasdaq, in contrast, offers companies access to deep pools of capital and a culture of risk-taking that fuels high-growth stocks. Even ASX in Australia has better liquidity for mid-sized companies, making it a more attractive option than SGX.

The numbers paint a stark picture. In 2024, SGX had only four IPOs, raising a combined US$31 million — its lowest IPO activity in over a decade. Compare that to Nasdaq’s 117 IPOs, HKEX’s 73 IPOs raising US$5.94 billion, or ASX’s 294 per cent year-on-year increase in IPO proceeds. The number of companies listed on SGX has also been steadily declining, from a peak of 782 in 2013 to just 617 in 2024, the lowest in two decades. The market has become increasingly unattractive not just to high-growth startups, but even to mid-sized enterprises that now look to ASX instead.

Unless there is a fundamental shift in market structure — such as stronger government-backed institutional support or reforms to boost trading volume — SGX will remain a second-tier exchange that struggles to sustain IPOs. 

The real, difficult-to-swallow reason

Still, all these structural issues — heavy-handed regulation, lack of liquidity, and competition from Nasdaq and Hong Kong — are symptoms, not the root cause. If I were to be brutally honest, the real reason Singapore’s IPO market is struggling is cultural.

Singapore does not have a culture of risk-taking and failure. It prioritises stability, predictability, and caution over volatility, ambition, and bold bets. And in the world of IPOs, that mindset is a death sentence.

It’s a tenuous paradigm to shift — the country’s entire economic and financial ecosystem is built around minimising risk. The Monetary Authority of Singapore is one of the world’s most conservative financial authorities — ensuring stability but also discouraging riskier investments. Investors — both institutional and retail — are deeply conservative, preferring guaranteed returns, stable dividends, and blue-chip stocks over high-growth, high-volatility companies.

Companies themselves are risk-averse, optimised for efficiency and steady expansion rather than aggressive scaling and disruption. Failure is not embraced as a stepping stone to success, but rather a reputational stain that is hard to recover from.

This culture kills IPO growth before it even begins. Founders hesitate to go public because they worry about reputational risk if their stock underperforms. Retail investors on the other hand prefer “safe” assets like REITs and financials, avoiding the uncertainty of volatile, high-growth stocks. SGX’s cautious, compliance-heavy approach also discourages companies from listing, exacerbating the problem further. The result is that startups don’t want to list, investors don’t want to buy, and SGX remains stagnant.

If Singapore is serious about reviving its IPO market, it needs to start shifting its perspective on risk. Encouraging a more speculative investment culture — whether through financial education, government-backed IPO incentives, or changes in investment policies for institutional players like Temasek and GIC — would help. So would rethinking failure as a necessary part of growth, so companies feel comfortable taking the leap without fearing total reputational collapse. 

Reflecting inward, SGX itself needs to be more flexible for high-growth firms, allowing for looser listing requirements and more post-IPO support mechanisms.

So why the tax incentives?

And even as the government introduces tax breaks for fund managers and IPO-bound companies (measures recommended by the Equities Market Review Group, which was set up in August 2024), it likely knows that none of this will meaningfully change SGX’s trajectory. It is too astute to believe that tax breaks alone will revive Singapore’s IPO pipeline. 

So the real question is why introduce them at all if they won’t fundamentally solve the problem.

Perhaps it’s a signal, not a solution. These measures signal that the government is paying attention to SGX’s struggles. While they won’t solve the problem, they give the appearance of action, which may help maintain investor confidence in the short term. Or maybe it’s about buying time for bigger reforms — tax incentives act as a temporary measure while policymakers debate more significant changes behind the scenes.

Or maybe, deep down, the government knows that SGX cannot compete on equal terms with Nasdaq and Hong Kong. By choosing modest tax incentives rather than sweeping regulatory changes, it might be quietly admitting that Singapore’s best bet is to position itself as a niche market for specific types of companies — REITs, green finance, or family-owned businesses — rather than a global IPO hub.

It’s just a band-aid

That said, the tax incentives in Budget 2025 are not a game-changer. At best, they provide short-term relief. At worst, they suggest the government knows SGX’s IPO issues are structural but is hesitant to take bolder action.

If Singapore is serious about reviving its capital markets, it needs to do far more than hand out tax breaks and hope for the best. It needs to confront the deeper issues that have made SGX an afterthought in global IPO discussions. It needs to rewire investor sentiment, overhaul its regulatory philosophy, and accept that a truly dynamic capital market cannot be built on the same foundations that have made Singapore so good at playing it safe.

The problem is, playing it safe doesn’t work in IPOs. Markets that thrive are those that embrace calculated risk, speculative capital, and companies willing to bet on an uncertain but high-growth future. SGX is none of those things.

And until that changes, no incentive, no fund manager tax break, no gentle nudge from the government will be enough to shake the perception that Singapore is a great place to run a business but a terrible place to take one public.

The world’s most ambitious companies will continue looking to Nasdaq, to Hong Kong, to Australia — anywhere but here. And maybe, just maybe, the government already knows that too.