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What Happened In The World Of Finance Over The Past Week

Photo credit: Rafael Matsunaga. Licence: http://creativecommons.org/licenses/by/2.0/

Let’s take a look at interesting developments over the past week in the world of finance that investors should take note of.

First, there’s the possible introduction of dual class share structures for companies listed in Singapore’s stock market. Then, we’d move on to the latest growth numbers for Singapore’s economy.

A possible introduction of dual share classes in Singapore

A company with a dual class share structure essentially has two classes of shares. The two classes carry the same economic rights per share. But while shares in one class will carry one vote, shares in another class will carry more votes. So in essence, the difference in the classes of shares comes down to voting power.

Having different share classses in a company allows certain shareholders to control most of the voting power even if they do not have a majority stake in the economic benefits reaped by the company.

A dual class share structure is something we can’t find in the companies of Singapore and Hong Kong’s stock markets at the moment, but it’s not uncommon in other stock markets around the world.

Things may change for Singapore’s stock market soon – earlier this month, Prime Minister Lee Hsien Loong approved dual class shares. Singapore’s local stock market operator has started a two-month public consultation to seek feedback on the matter, such as whether dual class shares should be allowed and what kind of safeguards are needed to prevent abuse.

As for Hong Kong, the head of its stock market operator had raised the topic of dual class shares in January this year. Back in 2015, a proposal to introduce dual class share structures was turned down by the territory’s regulator.

Some market observers have commented that having the ability to attract companies that require a dual class share structure (a dual class share structure is popular amongst technology companies) to list is a big driving force behind Singapore and Hong Kong’s moves to address their thinking on the issue.

Singapore’s economy powers ahead

Singapore’s economy grew at a faster pace than expected in the fourth quarter of 2016, expanding by 2.9% as compared to the government’s advance estimate of 1.8%. With that, Singapore’s 2016 full year economic growth came in at 2.0%, slightly higher than 2015’s showing of 1.9%.

The economy’s performance in the final quarter of 2016 can be attributed mainly to better performances in the manufacturing, transportation & storage, and “other services industries” sectors.

According to data released by the Ministry of Trade and Industry (MTI) last Friday, the manufacturing sector expanded by 11.5% year-on-year in the fourth quarter of 2016, propelled by strength in the electronics and the biomedical manufacturing clusters. Meanwhile, transportation & storage and “other services industries” experienced year-on-year growth of 5.4% and 3.9%, respectively.

In contrast, the construction sector shrank by 2.8% in the fourth quarter of 2016, due to declines in private sector construction activity. In the third quarter of 2016, the sector had slipped by 2.2%.

The MTI also foresees Singapore’s economy to grow by 1% to 3% in 2017. Is this too optimistic or pessimistic? We’d know in due time.

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