Rebuilding Wealth: ESI as Singapore’s Economic Bastion

In light of global trade challenges and a stagnant domestic equities market, the launch of Equities Singapore International (ESI) is essential as part of Singapore’s economic defence. This hypothetical government agency will promote and oversee developments and support activities for Singapore’s equity market, ensuring a sustainable cycle of institutional capital flows — a critical missing element in Singapore’s equity capital market ecosystem. Through this, ESI will be instrumental in safeguarding Singapore’s economic sovereignty and supporting its common prosperity.

Stock markets are no longer just for the wealthy; they are engines of middle-class prosperity. In the U.S., 56% of households own mutual funds, while India has 220 million direct equity investors. Market declines erode voter wealth and influence political outcomes, as seen with the 12% drop in the S&P 500 earlier this year, which prompted a 90-day tariff truce by the Trump administration during U.S.-China trade tensions.

With an investment public estimated at between 800,000 to 1.2 million retail investors, Singapore cannot overlook this reality. Private enterprises — profit-seeking, job-creating, and tax-paying — are the backbone of modern economies and crucial to political stability. However, irrational tariffs and protectionism disrupt global supply chains, forcing firms to absorb costs or pass them on to consumers. Such inflation erodes living standards and fuels electoral discontent.

The stagnation of Singapore’s equity market signals a troubling shift: the public firm model is unraveling, reflecting market shifts amid global structural reconfigurations. Delistings are not just corporate decisions. They are externalities that strip citizens of profit-sharing opportunities, weaken support for pro-business policies, and lead to long-term declines in investment and jobs.

Singapore’s equity market now stands at a crossroads. Once a beacon of Asian financial strength, the Singapore Exchange (SGX) faces dwindling listings—only 617 in 2024, a 20-year low— and more have delisted since the start of 2025; it also contends with stagnant liquidity. Yet, within these challenges lies opportunity.

Since the start of 2025, the Monetary Authority of Singapore (MAS) and Singapore finance centre ecosystem has initiated measures like tax rebates, liquidity injections, and innovative tools such as Singapore Depositary Receipts (SDRs). However, to reclaim its status as a global financial hub, Singapore must think bigger. Equities Singapore International (ESI) represents a bold proposal to channel the nation’s foreign reserves into a market renaissance.

ESI: A Sovereign Shield Against Market Erosion

ESI’s liquidity guarantees and retail incentives, such as fractional shares and fee waivers, aim to bridge Singapore’s 72% retail participation gap compared to India’s 85%. By supporting mid-cap firms and exchange-traded funds (ETFs), ESI ensures that citizens can access growth sectors like green technology and fintech, mirroring India’s success in democratizing equity ownership.

2024 saw the SGX experience a 20-year low in listings, with the trend of delistings continuing into 2025. This situation poses significant risks, including lost investor access due to private equity buyouts, which diverted profits from public shareholders.

Additionally, a shrinking pool of listed companies diminishes voter stakes in corporate success, undermining support for pro-market reforms. ESI addresses these challenges through IPO incentives, offering tax rebates for firms that maintain public listings, and implementing anti-zombie measures to eliminate unprofitable firms on Catalist (i.e. SGX’s junior market and equivalent to London’s AIM) – 57% of which are loss-makers — thus freeing up capital for high-growth ventures.

Geopolitical neutrality is an advantage for Singapore, as U.S. tariffs distort markets and China’s regulatory changes unsettle investors. ESI can leverage geopolitical neutrality to position Singapore as a stable hub for global firms seeking neutral ground. The secondary listing of China’s Helens International (SGX: 2025) exemplifies this strategic appeal, showcasing Singapore’s potential as a safe haven for international investors.

The Straits Times Index (STI) is viewed as an attractive alternative for diversifying away from expensive global tech stocks, offering high dividend yields and low volatility that appeal to investors seeking income or defensive positions. Additionally, Singapore’s demographic changes, particularly an aging population, have heightened demand for investment opportunities that provide lower volatility and higher dividends, further enhancing the STI’s appeal for long-term investors.

To improve market connectivity, ESI should collaborate with local banking partners to issue Singapore Depositary Receipts (SDRs) for globally-listed blue-chip firms in key sectors such as biotechnology, consumer goods, healthcare, energy, property/real estate, and technology. Priority should be given to companies headquartered or listed in major financial centers like the U.S., Switzerland, London, Hong Kong, Tokyo, Taipei, Riyadh, Abu Dhabi, Amsterdam, Frankfurt, and Zurich, especially those with significant Asian exposure and operational hubs in Singapore.

These SDRs will serve three strategic purposes: broadening investor choice by providing access to internationally recognized names within a local regulatory framework, boosting liquidity by stimulating trading activity and price discovery on SGX, and encouraging secondary listings as a pathway to full dual listings in Singapore by demonstrating demand and visibility through trading activity.

To mitigate concentration risks and ensure diversified exposure, ESI should limit placements in secondary listings to 10% of the total float. Issuing SDRs for companies like Google, Uber, Logitech, Novartis, TSMC, and other international firms will facilitate access for local and Asian investors while signaling that international enterprises can tap into capital on the Singapore exchange.

Another element is expanding ETF anchors for anchor liquidity and deepening market participation. ESI should focus on launching and scaling key ETFs: an ASEAN IPO ETF that tracks initial public offerings across the region to capture growth and attract cross-border flows; an FTSE ST All-Share ETF that provides broad-based exposure to all SGX-listed firms, fostering diversified domestic participation; and an ST Catalist ETF that offers targeted exposure to emerging growth companies on the Catalist board, enhancing their visibility and access to funding.

Global Lessons, Local Solutions

India’s rapidly maturing stock market serves as a compelling reference point. The rise to over 220 million equity portfolios—driven by zero-commission brokerage platforms and nationwide financial literacy initiatives—demonstrates how broad-based retail participation can deepen capital markets. This is underpinned by its dematerialised account.

A demat account—short for *Dematerialised account*—allows investors to hold securities such as stocks, bonds, mutual funds, and ETFs electronically, eliminating the need for physical share certificates and reducing the risks of loss or theft.

Managed by the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), the demat system democratizes access to capital markets, enabling efficient, secure, and paperless trading. Both depositories operate through a network of Depository Participants (DPs), including banks and brokerage firms, which facilitate account management and transactions.

As of March 2025, India had approximately 192.4 million demat accounts, up from 185.3 million at the end of 2024. This growth reflects increased retail participation in the capital markets, driven by simplified account opening, smartphone penetration, and favorable market conditions. Domestic brokerages added a record 41.1 million demat accounts in the financial year 2024–25 (FY25).

Demat accounts offer several key features and benefits that enhance the investment experience. They streamline settlement cycles, currently operating on a T+2 basis, with plans for optional same-day (T+0) settlement for top stocks starting January 31, 2025. These accounts accommodate a broad range of financial instruments, providing investors with a consolidated view of their holdings.

Accessibility is another advantage, as investors can manage their accounts online for real-time portfolio monitoring. The electronic format also reduces transaction costs by eliminating the need for physical documentation, making trading more cost-effective. Additionally, demat accounts allow for flexible trading, enabling investors to buy or sell individual shares without the limitations of fixed lot trading.

Sweden’s Investment Savings Account (ISK), introduced in 2012, has also significantly enhanced the dynamism of its capital markets. By simplifying tax procedures and reducing administrative burdens, ISKs have encouraged widespread retail investment, boosting market liquidity and depth. The key features and impacts of the ISK are:

• Simplified Taxation: Investors pay a low annual tax on the total value of their holdings, eliminating the need to report individual capital gains or dividends.
• Broad Adoption: By 2024, approximately 3.5 million Swedes held ISK accounts, indicating a strong culture of equity investment.
• Boost to IPO Activity: The introduction of ISKs correlates with a near doubling of IPOs between 2014 and 2016, particularly on the First North market, which caters to small and medium-sized enterprises (SMEs).
• Enhanced Market Performance: Sweden’s stock market has consistently outperformed many European counterparts, attracting both domestic and foreign companies to list on Nasdaq Stockholm.

Singapore could adopt a similar approach by integrating Central Provident Fund (CPF) savings into investment schemes akin to Sweden’s ISK. Allowing CPF Ordinary Account (OA) funds to invest in ESI-backed ETFs, currently restricted under the Special Singapore Government Securities (SSGS) framework, could broaden retail participation. Additionally, implementing a digital shareholding system, similar to India’s “Demat” model, could reduce transaction costs and further encourage retail investment.

By learning from the experiences of India and Sweden, Singapore can enhance its capital market depth, support SMEs through increased IPO activity, and promote a culture of long-term investment among its citizens.

As for institutional support from the public sector channeled via equity ETF purchases? Japan’s experience, where the Bank of Japan (BOJ) owned 70% of its ETF market in 2021, highlights the risks of distorted valuations and suppressed price discovery. ESI can implement safeguards to avoid similar pitfalls, including sector caps that limit individual stock holdings to 2%, ensuring a diversified portfolio.

Furthermore, 80% of ESI’s capital will track passive indices, such as the Straits Times Index (STI) and mid-cap indices, to mitigate the risks associated with active stock-picking. To maintain transparency and accountability, ESI can provide semi-annual or quarterly disclosures audited by PwC and SGX RegCo, ensuring cost-efficiency without compromising governance standards.

Funding ESI Through Singapore’s Foreign Reserves

ESI’s primary role is to address the sovereign capital gap in Singapore’s market, demonstrating the stabilizing effect of sovereign capital in financial markets while sending a positive signal to the market. The case of the Government Pension Investment Fund (GPIF) investing in Japanese equities after a 25-year hiatus illustrates this.

In 2014, GPIF decided to allocate a small percentage to domestic equities, which became the pivotal factor enabling the Nikkei to surpass its 1989 high in 2024. To mitigate moral hazard and reputational risk, the government delegated this responsibility to local fund managers, who placed orders through brokers and provided capital to support IPOs and secondary liquidity.

This approach revitalized an ecosystem that had been eroding for years. As investment limits were gradually raised and local retail investors entered the market—supported by tax incentives from their pension investments—foreign investors returned, attracted by the newfound liquidity and volatility. This domestic confidence ultimately fostered foreign confidence, creating a positive feedback loop in the market. This is precisely what ESI aims to achieve.

The Securities Daily Average Value (SDAV), the daily trading turnover of the equities market, has remained relatively stable over the years, averaging around S$1.2 billion, suggesting consistent trading activity. But this is for a diminishing pool of companies. The number of listed companies (listcos) on the SGX peaked at 782 in 2012 and has since been on a declining trend, reaching 613 by 2024. This decline is attributed to factors such as domestic companies seeking overseas listings in larger markets like the US.

Aggregate market capitalization increased from SGD 899.1 billion in 2012 to SGD 1.1 trillion in 2017, then declined to SGD 802.6 billion in 2023. In 2024, it rebounded to SGD 865.9 billion, driven by the outperformance of large-cap banks.

Establishing ESI can reverse this decline and serve as sovereign backstop its equity capital markets ecosystem lacks. It aligns with the MAS Act, which allows for the transfer of excess reserves to government entities like the Government of Singapore Investment Corporation (GIC) for strategic investments. This mechanism was effectively utilized in 2022 when MAS transferred S$75 billion of excess official foreign reserves to GIC.

For instance, in 2024, Thailand’s Vayupak Fund injected THB 150 billion, leading to a 30% reduction in bid-ask spreads for SET50 stocks. Similarly, the Hong Kong Monetary Authority’s Exchange Fund allocates  a portion of its reserves to local equities, which reinforces investor confidence.

In Malaysia, the Employees Provident Fund (EPF) manages RM1.25 trillion in assets and reported RM74.46 billion in investment income, with 63% of its investments allocated domestically, contributing to 49.7% of total income. The Retirement Fund Inc. (KWAP) achieved a 12% total return on a RM185.6 billion portfolio, with domestic equities delivering impressive returns of 23.2%.

Japan’s Government Pension Investment Fund (GPIF), which oversees approximately ¥253 trillion (USD 1.7 trillion), maintains a balanced allocation between domestic and foreign stocks and bonds, targeting a return of 1.9% above nominal wage growth. Additionally, the Bank of Japan (BOJ) continues to play a crucial role in market liquidity through sustained equity investments.

The approach of ESI aims to maintain liquidity neutrality while strategically deploying reserves for long-term growth. Singapore’s defense budget has averaged US$9.59 billion annually from 2010 to 2020, increasing to US$15.1 billion in 2024, which constitutes 2.8% of the GDP.

In contrast, ESI’s proposed US$10 billion injection represents 66% of the 2024 defense budget and only 0.27% of Singapore’s 2023 GDP (US$515 billion). This highlights ESI’s cost efficiency as a tool for “economic defense,” safeguarding market sovereignty without compromising fiscal prudence.

With a hypothetical capital base of US$10 billion , ESI would catalyze a self-reinforcing investment ecosystem. The plan includes deploying US$8 billion in passive indexing through STI and mid-cap ETFs, with individual holdings capped at 2% to prevent distortions similar to those seen with the Bank of Japan’s policies.

Additionally, US$2 cillion would be allocated to green technology and fintech, sectors vital to Singapore’s 2030 Green Plan. To enhance retail participation, ESI could reinvest 60% of dividends/investment gains into fee waivers and fractional shares, addressing SGX’s high trading costs, which stand at US$35 per US$10,000 trade compared to India’s US$1.50.

ESI’s structure would adhere to the Monetary Authority of Singapore’s (MAS) constitutional safeguards. A “Two-Key” system would ensure presidential oversight, preventing any draw on past reserves without consensus from both the executive and legislative branches.

Furthermore, ESI would implement transparency measures, including semi-annual audits conducted by PwC and SGX RegCo, mirroring the governance practices of Temasek. To prepare for potential crises, ESI would reserve US$2 to US$4 billion for intervention, similar to the Hong Kong Monetary Authority’s Exchange Fund.

To ensure a long-term impact that aligns with global precedents, ESI can adopt a liquidity-first approach similar to that of the Hong Kong Monetary Authority (HKMA). This strategy allows ESI to avoid the pitfalls experienced by Japan, such as suppressed price discovery and market distortions.

Conclusion: Economic Defense as National Priority

Singapore’s reserves are a “strategic asset” for times of crisis. By allocating US$10 billion—a small portion of its official foreign reserves—to Equities Singapore International (ESI), Singapore can:

1. Counter delistings that limit citizen-investor access.
2. Enhance liquidity for mid-cap companies and the broader market, addressing a 20-year low in SGX listings.
3. Align with defense spending logic: just as military budgets deter physical threats, ESI strengthens economic resilience.

This positions ESI not as an expense, but as a sovereign investment in Singapore’s financial stability. This is essential in an era of geopolitical fragmentation. Singapore’s equity market is more than a financial metric; it’s a measure of economic sovereignty.

ESI represents an evolution of the Monetary Authority of Singapore’s legacy, combining prudent reserve management with bold market-building strategies. As global capital becomes fragmented, Singapore faces a clear choice: lead with sovereignty or risk fading into irrelevance.

Lee Kuan Yew’s adage resonates now more than ever: “To stand still is to fall behind.” ESI ensures Singapore moves forward.

*Note: AI tools were used in the article, drafting and formatting of this article. The conclusions and final analyses are the sole responsibility of the author.