There were 2 big pieces of news the past week. The first was Motley Fool Singapore announcing that they were closing down. The second, was Property Guru announcing their decision to list on the Australian Stock Exchange, rather than Singapore.
Motley Fool Singapore Closing Down
Taken from Motley Fool’s Singapore website:
It is with a heavy heart we’re giving you notice of our closure. The Motley Fool Singapore will be closing on 31st October 2019. We started fool.sg in 2013 and over the years, we’ve grown here in Singapore together with the Foolish community.
We’re proud of the community that we’ve built and are extremely grateful for all the support you have given us. But the challenging environment has made it very difficult for us to grow our newsletter business, meaningfully.
That’s why we’ve made the tough decision to officially cease Motley Fool Singapore’s operations on the 31st of October 2019. As such, we regret that we will also stop posting content on this date.
Even though the Motley Fool Singapore may not be around, we hope our long-term investing philosophy will last in the minds of our community. Continue to invest the Motley Fool way and think of us fondly every time you buy a share.
Thank you for your support and best wishes on your future endeavours and investing performance!
-The Motley Fool Singapore Team
And here is the email to members of their Stock Advisor service, as shared by a fellow reader on the FH Facebook Group:
Dear Stock Advisor Singapore member,
It is with a heavy heart we’re giving all members notice of our closure.
Stock Advisor Singapore, along with all of The Motley Fool Singapore’s services, will be closing on 31st October 2019.
We are currently in the process of refunding all memberships on a pro-rata basis. This means that your refund amount will be based on how many days remain on your subscription.
Six years ago, we set out to bring The Motley Fool investing philosophy to investors in Singapore.
We had high hopes that we could show investors that there is a better way to invest rather than simply jump in and out of the market on a whim. We believe we have achieved that and more.
I was lamenting just the other day with my colleagues that it is sad to see one of the very few truly independent research providers go.
We started fool.sg in 2013, MF550 in 2015, and Stock Advisor Singapore in 2016. Over the years, we’ve grown here in Singapore together with the Foolish community.
On behalf of the Motley Fool Singapore team, we thank each and every one of you who has supported us along the way.
We could not have done it without you.
We are proud of the community that we’ve built and are extremely grateful for all the support you have given us.
There have been moments of great joy when we successfully contributed to the debate on changing the onerous lot size for shares here in Singapore.
But there were also moments of exasperation when it was touch-and-go as to whether Hawker Chan would be able to deliver his soy sauce chicken on time at one of our Stock Advisor Gold pop-up events.
But that pales in comparison to the challenging environment that has made it very difficult for us to grow, meaningfully.
That’s why we’ve made the tough decision to officially cease Motley Fool Singapore’s operations. The last day that we will provide services to members will be on the 31st of October 2019.
As such, we regret that Stock Advisor Singapore will be closing down.
But we hope that you will take away everything that you have learnt about the benefits of long-term investing. Even though the Motley Fool Singapore may not be around, we hope the lessons of long term investing in companies will last in the minds of our community.
We hope that you will continue to invest the Motley Fool way and think of us fondly every time you buy a share.
Whilst it is sad to say goodbye, we want to ensure that you have the best experience possible with our service, and The Motley Fool, as we wrap up our services and process your refunds.
Property Guru IPO-ing in ASX rather than SGX
And at the same time:
South-east Asian real estate portal PropertyGuru, which counts buyout firms TPG Capital and KKR among its backers, has announced its intention to list on the Australian Securities Exchange (ASX), which will fund potential expansion plans such as an online mortgage marketplace and data offerings.
Asked why PropertyGuru decided to list on the ASX despite not having businesses in Australia, a company spokesman declined to comment.
PropertyGuru did not announce any plans to expand into Australia. In the prospectus, Australia and the UK are cited as examples of developed markets, in contrast to its South-east Asian core market which lags behind in terms of Internet penetration and is still in the early stages of offline-to-online migration for real estate advertising.
Why is Motley Fool Singapore closing down?
Now the official reason here, as reported in an interview with the CEO in the Business Times, is declining profitability due to regulatory issues:
Its chief executive officer David Kuo said: “We are a subscription service, we don’t manage people’s funds so it’s hard to understand why we have to be regulated the same way as a financial institution.”
But nobody is to blame, noted Mr Kuo. “It comes down to regulation and I am not at any point criticising it, it’s just that it does not make commercial sense for us to operate under such rules,” he said.
Under the FAA, the firm is required to maintain a paid-up capital of S$150,000 and net assets sufficient to cover at least three months of their expenses, subject to a minimum of S$112,500. “This is to ensure they have sufficient financial resources to meet their near-term obligations,” said a MAS spokesperson.
Such rules hindered the growth of the company as income from subscription fees have to be booked as assets. “Unfortunately, because we have to keep all of this cash as net assets, we cannot grow the business. The more we grow, the more net asset is required,” said Mr Kuo.
Motley Fool, however, continues to thrive in markets outside Singapore including the US, Australia and Japan. “They are not regulated the same way we are and that really is the crux of the matter,” said Mr Kuo.
Personally, I do agree the core reason here is declining profitability. But was it purely due to regulatory issues though? Could it have something to do with declining public interest on stock trading / investing in Singapore?
To be really honest, I’ve never been a huge fan of Motley Fool Singapore. I always thought that the free articles on their website could go slightly deeper with the analysis.
But now that they are closing down, I am genuinely sad to see them go. Despite everything, they were doing their part to promote financial literacy and knowledge among investors in Singapore.
They were fellow brethren in the same investing community we inhabit. And their departure leaves us poorer for it.
Problems with Singapore Capital Markets
The fact that this came on the same week that PropertyGuru, decided to list on the ASX rather than the SGX, marks this as a sad week for the state of Singapore capital markets.
This joins a whole list of Singapore companies (Razer and SEA come to mind) that decided to forgo the SGX for a foreign listing.
And to be fair, I completely understand where they’re coming from.
The problem with Singapore capital markets these days works like this:
- Ever since the penny stock incident a few years back, retail investor interest has been on a gradual decline.
- This has led to decreasing trading liquidity, and lower stock prices for listed companies.
- As stock prices (and valuations) drop, and trading liquidity drops, existing SMEs no longer see the value in staying listed and having to comply with listing obligations (which are no joke in Singapore). So they take their company private.
- New companies see the sorry state of affairs and are reluctant to come to SGX to list.
- Without exciting new IPOs, and stock prices going up, this further depresses retail investor interest, bringing us back to point 1 and creating a self-fulfilling downward spiral.
In fact the MAS even came up with an initiative to boost investor sentiment in Singapore:
The Singapore equity market serves as a gateway for Asian enterprises to access a diversified pool of regional and global investors for growth capital to support their business expansion. MAS introduced the Grant for Equity Market Singapore (GEMS) scheme to help issuers defray some of the listing costs and to enhance the research ecosystem, which will in turn facilitate better price discovery and liquidity for public listed companies.
GEMS comprises three components and is valid for three years from 14 February 2019:
- Listing Grant to encourage potential issuers to list on the Singapore Exchange (SGX) by co-funding part of the eligible expenses.
- Research Talent Development Grant to encourage financial institutions to hire research professionals by co-funding hiring costs.
- Research Initiative Grant is earmarked to fund crowd-sourced initiatives that will propel the development of Singapore’s equity research ecosystem. Such initiatives could include new format of equity research, or innovative ways to distribute research and disseminate enterprise information to investors.
It’s a really commendable effort, but I do have some doubts as to the effectiveness of this policy.
Taking a step back, what does a city need to have to build a successful capital markets? I shared in the previous article (on why Hong Kong will not be surpassed by Shanghai/Shenzhen in the near future) there are 4 key points:
(1) a large domestic economy,
(2) economic stability,
(3) strong government and institutional support, and
(4) a deep, open and regulated capital markets.
Singapore passes with flying colours on points 2 to 4. The economy is stable, governments and institutions are cooperative, and we have open and well-regulated capital markets. Where we fall short, is the presence of a large domestic economy.
Hong Kong has China, New York has US, London has Europe, Tokyo has Japan, Singapore has….? Lee Kuan Yew used to always talk about Singapore’s lack of a hinterland, and I agree 100%.
We used to be able to attract South East Asian companies to list here, but these days, their local exchanges have become more aggressive, so we now see Thai companies listing in Bangkok, Indonesian companies listing in Jakarta etc.
So there are certain structural headwinds here that may not be easily solved by funding equity research or covering listing expenses.
Note: Don’t get me wrong, this only applies to the small to mid cap stocks. I think the blue chip counters like the Temasek linked entities (DBS, CapitaLand, Singtel etc) are doing fine, as well as the bigger REITs (anything above $2 billion market cap). It’s when we enter the SME market (anything below $2 billion market cap), and attracting big new listings, where this problem really manifests itself.
What does this mean for Singapore Investors?
There was a Bloomberg article recently that said that a financial centre does not need to have a successful capital markets to thrive. I’m not so sure I agree with that.
A thriving capital markets is a fundamental tenet of any successful financial centre, and without one, Singapore is going to be fighting with a hand tied behind its back. It’s just not going to be able to offer investors the same kind of complete financing package a Hong Kong or London can.
As an investor, the solution here is simple. I will simply go where the money goes. If good companies go to Hong Kong or New York, my money goes there as well. These days, with an international broker like Saxo Markets, the only difference to me is the brokerage fee.
As a Singaporean though, it truly makes me sad. I don’t have any easy solutions for this yet, but I’ll continue working on them. If any reader out there has good solutions, please do share in the comments below!
What about Financial Horse?
Now that Motley Fool Singapore is closing down, what about the fate of Financial Horse? Is it destined to go down the same route?
When I started Financial Horse, I started it for the very simple reason that I wanted to provide high quality, no bullshit financial commentary for Singapore investors.
I’d grown up reading the myriad of US financial blogs and resources like Seeking Alpha, and I was mind blown that there was nothing of similar quality tailored for the Singapore audience.
I knew it would be hard work with little reward, so I told myself that I would write a minimum of one article every week for 3 years, and then reassess where I am.
It’s been more than 1.5 years since I first founded this site in early 2018, so in around 1.5 years, I’ll reassess where I am and decide whether to continue.
But that one thing that I could not have predicted when I started was the overwhelming outpouring of sharing and support from all you readers.
Having to research stocks and write content every week even after coming back from work dead tired has not been easy, but it has been much easier with all of your support, your sharing, and your kind words.
So I just wanted to express my eternal thanks to each and every one of you readers for supporting this site. Your support truly means the world to me, and keeps me going on this journey.
Special shoutout also to all Patrons who have generously contributed a small sum every month to keep this site going. Every little bit counts, and I’m truly grateful to each and every one of you.
Replacements to Motley Fool Singapore
Now it’s not a perfect replacement for Motley Fool, but the Patron series does include an FH Stock Watch, where I share the list of stocks that I am personally monitoring, and where I plan to open positions in the coming months. You’ll also get to take a look at my complete asset allocation (with stock breakdown) on a percentage basis. Oh, and you’ll also get me sharing additional thoughts that I may not share publicly on this site.
It’s not much, but it’s a way of expressing my gratitude, and providing additional exclusive content to supporters of this site.
Looking for a comprehensive guide to investing? Check out the FH Complete Guide to Investing for Singapore investors.
Support the site as a Patron and get market and stock watch updates. Big shoutout to all Patrons for their support!