Analysis: Media assets & strategic narrative can SGX corporate ecosystem, Singapore’s finance centre
Amid the developments shaping stock exchanges into major forces in global finance and equity capital markets, the Singapore Exchange (SGX) evolve a strategic narrative and develop media muscle to further amplify its equities unit, as well as other businesses. This is key to promoting Singapore’s finance centre, further reinforcing its equity capital markets, and safeguarding against private sector misconduct.
Promoting and sustaining the business narratives of Singapore’s capital markets — and SGX’s own equities business by extension — requires a financial/business media brand to operate as a growth engine as well as check on corporate malpractice.
A media brand with a high degree of editorial autonomy — like the South China Morning Post prior to its acquisition by Robert Kuok in 1993 and subsequently the Alibaba Group in 2016 — could boost the business media ecosystem.
Beyond a media property being instrumental in the SGX Group being able to further calibrate an ecosystem strategy, it’s a necessity for Singapore’s media ecosystem and capital markets to move forward and sustain the finance centre.
Such a media asset can contribute to the city-state’s finance media landscape and the financial information environment, and in fact could enhance safeguards against corporate crime. With Singapore’s own slew of corporate governance scandals in recent years across the private sector, Singapore’s information environment needs greater news coverage and critical reporting of business misconduct.
“When the local newspaper leaves town: The effects of local newspaper closures on corporate misconduct”, a paper published by the Journal of Financial Economics in August 2022, highlights how local press is crucial to surveilling and combating firms’ misconduct. Possible media coverage deters corporate officials from bending the rules. And in fact protects businesses from reputational cost and regulatory penalties.
Singapore secured the accolade of being the third-ranked global finance centre after London and New York and Asia’s leading hub for 2022, a robustly positive reflection on its ecosystem. But where it lags is the critical media ecosystem and business publications that leading finance centres like London and New York have, which allows them to keep stakeholders accountable and tell nuanced narratives of their ecosystems to the global investor audience.
To influence and shape a multidimensional view of Singapore’s finance centre and capital markets globally, enhance investor literacy and safeguard stakeholder interests in a market that seeks to promote itself as a ‘well-regulated safe haven’, enhancing media assets is key to the evolution of its finance centre.
Research from anti-corruption non-profit Transparency International notes how media is instrumental in “strengthening processes of democratisation (Norris 2008), quality of government, (Färdigh 2013), economic development (Besley & Prat 2006) and anti-corruption (Brunetti & Weder 2003, Färdigh 2013)”, with traditional, online and social media playing an important role in combating corruption.
This is backed by the UN Office on Drugs & Crime (UNODC), which notes: ” “There are several studies that have demonstrated the correlation between press freedom and corruption (Bolsius, 2012; Brunetti and Weder, 2003; Chowdhury, 2004; Fardig, Andersson, and Oscarsson, 2011)”. The 2010s saw prominent examples which highlight the crucial role journalists and the media play in combating corruption.
In 2015, the Mossack Fonseca Papers case (i.e. Panama Papers case) saw documents leaked from Panama-based law firm Mossack Fonseca to Süddeutsche Zeitung (SZ), a German newspaper. This led to revelations of criminal misconduct and tax evasion. Collaboration between SZ and the International Consortium of Investigative Journalists (ICIJ) led to lawsuits across numerous jurisdictions. And in 2020, German authorities issued international arrest warrants for Jürgen Mossack and Ramón Fonseca, the principals of Mossack Fonseca.
The ame year also saw the 1MDB scandal, which involved systematic corruption and money laundering centres on sovereign fund 1Malaysia Development Berhad (1MDB). Documents leaked in 2015 to the publications such as The Edge, Sarawak Report, and Wall Street Journal (WSJ) showed how Malaysia’s then-Prime Minister Najib Razak had systematically embezzled money from the sovereign fund.
The fallout of the financial scandal was international, implicating politicians, banking institutions and entertainment figures worldwide, with conspirators operating across the US, Saudi Arabia, UAE, Malaysia and Singapore, as well as other jurisdictions.
Such scandals highlight how journalists and media houses can demand accountability and transparency from both the public and private sectors, serving an anti-corruption role to safeguard public and professional interests. Fundamentally, media channels information about public sector and private sector activities to be disseminated And this sustains a critical capacity to keep major stakeholders, whether institutions or individuals, accountable.
Hong Kong: Impact of Declining Media
Nowhere is the importance of a media ecosystems’ relevance to a finance centre cast into the spotlight than Hong Kong’s relative decline. The erosion of press freedoms have inflicted economic injury, with the impact of the National Security Law (NSL) creating suspicion and reducing confidence in the legal system of the special administrative region (SAR).
This is part of a global erosion of press freedom that investors have seemingly overlooked. While this varies with different investor communities, sectors that benefit from highly skilled labour with high wages (e.g. financial services) perceive media freedom as a positive factor for a country’s investment climate.
Other actors in sectors such as mining, oil & gas (MOG) may see press freedom as a burden, with reports on environmentally damaging projects driving down share prices and creating reputational and regulatory liabilities. In such scenarios? Journalists are a nuisance.
Until the late 2010s, Hong Kong maintained a “highly transparent system of corporate registration, affording visibility on issues including corruption, links between politically and economically influential mainland families…even violations of sanctions against Iran”.
But the NSL changes this. The pro-Beijing administration invokes privacy concerns to cloak information. This impairs the capacity of both journalists and investors to map out relevant relationships, mitigate potential risks and better understand a firms fundamentals.
Moreover, the NSL arguably affects equity research and could drive censorship of certain firms in the market. The NSL has also led to hedge funds considering exits partially or fully from Hong Kong to other finance centres in the region. Such reports have been amplified in various international media. The economic damage from the loss of press freedom is likely to endure for many years, as well as altered perceptions of Hong Kong.
With measures like libel laws and other legal sanctions, as well as shrouding corporate information to discourage journalism, there is clear evidence that attacks on press freedom measurably dent economic growth.
A study led by Jeremy Nguyen, an economist at the Swinburne Business School, used a data set that incorporated rankings on press freedom from the US-based Freedom House and data on economic growth to evaluate 97 countries in the 1972–2014 period. Decreased press freedom accounted for a 1%-2% drop in real gross domestic product (GDP) growth.
In Hong Kong’s case, this is only compounded by the crackdown of lawyers the NSL entails, with senior lawyers leaving Hong Kong. Coupled with the decline in press freedom, these will act in synergy to shift perceptions of public companies in Hong Kong at some point, given how legal perceptions can impact valuation.
This phenomenon will impact its equity capital markets and financial services sector in the long run, given how legal perceptions impact firm valuations. The perception of the quality of law regimes and shareholder protections — more so than the actual quality of a legal system — impacts the valuation of post-IPO firms.
Such “legal signalling” impacts perceived legitimacy, rather than the efficiency of economic activities of systems and the companies operating therein.
This public perception of legal systems and their impact on company operations therefore influences the behaviours of different stakeholders and actors. Laws serve not only as transaction-cost reducing devices but also as instruments that create legitimacy. Laws signal a need for adherence to specific norms and behaviours by market participants.
While corporate governance practices can compensate for negative legal perceptions up to a point, Hong Kong is apparently caught in a loop. This is despite ranking second, in the same place as Singapore, according to the 2020 CG Watch, published jointly by the Asian Corporate Governance Association (ACGA) and CLSA Limited (CLSA). Despite marked improvements, both Hong Kong and Singapore exhibited weaknesses in public and corporate governance systems, lagging behind Australia.
Hong Kong’s eroding press freedom and diminishing legal system will only compound the worsening of corporate governance in the territory. “Press freedom and operational losses: The monitoring role of the media”, published in the Journal of International Financial Markets, Institutions and Money, notes how the media operates as a passive monitor in corporate governance. It reduces the frequency and severity of public operational losses — a monitoring role more marked in larger economies — with media having both detection and deterrence effects.
There is the long-term economic impost to undermining a free press. Hong Kong established itself as a finance centre based on access to honest and fact-based journalism, which for many years gave it an edge over Singapore.
Research from Freedom House suggests “press freedom can rebound from even lengthy stints of repression…given the opportunity”. But economic vibrancy never fully recovers even when press freedom is restored. Free markets and free media intersect to produce beneficial outcomes and are a positive economic force.
While outliers like Singapore exist — economically free and developed yet relatively dismal in media freedom — economic freedom protects journalists and vice versa, creating a positive feedback loop.
As competition between Asian finance centres heats up, declining press freedom means Hong Kong’s finance centre has lost an asset. It also raises questions of its diminishment as a global city.
Overall, while significant inflows into Hong Kong from Greater China will remain, the NSL will diminish Hong Kong’s appeal to international investors. This is not helped by the hollowing of its international talent pool that threatens its finance centre, as well as the overall loss of its lustre as a ‘world city’.
As of 2H 2022, journalists are increasingly restricted in their reporting, while market analysts are engaging in self-censorship. Hong Kong and its finance centre possess a critical mass and an enduring advantage as a major Chinese commercial hub and gateway to the mainland, where it competes with Shanghai.
More recently, Hong Kong’s economy has also reentered recession, with declining press freedom and corporate transparency seeing investment banks and news organisations shift staff elsewhere. This is coupled with bets against the Hong Kong Dollar — US Dollar peg as the relationship between China and the US becomes more adversarial.
The Hong Kong Monetary Authority (HKMA) also lacks an independent monetary policy. This amplifies Hong Kong’s economic strains, inclusive of chronic socioeconomic inequality and compounded by a property market structure that drives high living costs even as social mobility declines.
An overlooked additional factor — besides a desire for self-determination — that catalysed protests in 2014 and 2019/2020 in Hong Kong was socioeconomic inequality. For instance, Oxfam noted in 2018 how Hong Kong’s Gini coefficient, a key wealth-gap indicator, reached a 45-year high of 0.539, where 1 indicates maximum inequality. For the same period, Singapore’s Gini coefficient was 0.356 according to Oxfam, while the Singapore Department of Statistics (SingStat) reported it as 0.458.
In the long run, the reduction of factors like media freedom, rule of law and diminished corporate governance will affect foreign inflows and perceptions of Hong Kong’s business appeal on an international basis in time.
Internal politics in China may also dictate Hong Kong’s fate, due to Beijing wishing to emphasise the development of other cities within China as the paramount commercial centre, such as Shenzhen or Shanghai. For instance, as Xi Jinping and his Beijing leadership face arguably the worst social unrest in China since the Tiananmen protests of 1989, odds of a shift in Hong Kong’s policies are low.
Media: Ecosystem enabler & advantage
In the context of the financial world, stock exchange groups are now large conglomerates with diverse holdings that dominate the financial world. Marc Rubinstein, a former hedge fund manager and publisher of weekly finance newsletter Net Interest notes how factors such as clearinghouses; indexation driven by the rise of passive investment; and access to market data have contributed to the positions of strength these conglomerates have established and sustained through their corporate ecosystems.
However, media is the missing component in many ecosystems that enables conglomerates to become “ecosystem orchestrators” with ‘turnstiles of competitive advantage’ through their business ecosystems that activate networks spanning multiple sectors. Media is key to driving changes in behaviour, with key roles shaping behaviours, beliefs and responses with regards to subject matter as varied as climate change, non-violent behaviour and domestic abuse.
The most visible companies that pursue this ecosystem orchestration strategy are Apple, Amazon, Google, Alibaba, Tencent and Xiaomi, among others. Through interconnected links to different services within their internal corporate economies, they “create value through relationships and networks” where interlocking business units develop a virtuous cycle.
Julian Birkinshaw of London Business School explained in an interaction with Harvard Business Review: “They [these firms] want to get as many players involved in their ecosystem as possible, and to get them interacting according to rules they have shaped. Of course, there are many ways these companies make money — committees, membership fees, advertising sales, and so on — but the key point with all these business models is that they work better when the ecosystem is larger. That’s why the turnstile metaphor is useful.”
In Xiaomi’s specific case, the company’s founder Lei Jun explained in a 2017 interview with Pandaily: “We gathered a group of cellphone enthusiasts and established the Xiaomi community when we first started off. Then we designed the MIUI operating system. Next came cellphones and e-commerce. And after e-commerce gained success, we went after cloud services and large data computing with great determination and then focused on making TV and routers immediately after.”
“In fact, television was something we were prepared to do at the very beginning except we were too strict on ourselves with product requirements and was a few months late to its release. And the whole idea of working on routers is because they are the core of smart home designs.”
“We targeted the business of smart home design and went after network e-commerce, entertainment systems, ecological chains, Xiaomi home, Internet finance and another online platform named Youpin Store. Youpin is an online store where publicly voted goods are finely designed and sold in order to achieve quality living. Its size is quite massive already too”, he adds.
Bearing the Xiaomi models in mind, it was media firms like Universal Studios and Disney who developed such models. Their approach was to build, sustain and maintain their audience on the strength of the intellectual property (IP).
For Disney and Universal Studios, their major entertainment segments — media networks, theme parks and resorts, film and television, consumer goods, and interactive entertainment — creates an ecosystem of mutually enhancing elements that adds value to their IP. This is also supported by management teams that understand the core elements of their media business. Fundamentally, they have built synergistic ecosystems of mutually reinforcing properties.
In media acquisitions, the content engine is coupled with the core business. This is because media content acts as a force multiplier. Conferences (i.e. event products) aggregate communities, with content being the funnel and amplifier that attracts the finite attention of the audience, which every industry competes for.
The Hustle, a tech and business newsletter with 2 million subscribers, was acquired by marketing software firm HubSpot in 2021. HubSpot now promotes various products through the newsletter. The same applies to media startup Morning Brew, which in 2020 was acquired by Axel Spring-backed Insider in a deal that valued it at US$75 million. Early 2022 saw it positioned for further growth, given how newsletters simplify “disseminating information to remote, dispersed audiences”.
Other acquisitions of media operations by software firms include Product Hunt by investment platform AngelList, Indie Hackers by payments technology provider Stripe, and Makerpad by automation platform Zapier. These all reflect a larger shift in consumer playbooks as businesses seek new channels to reach out and engage with customers.
Financial services major Bloomberg LP channels exchange data, operates trading platforms and maintains an index provider. The company operates across the financial, software, data, and media spaces, starting with providing real-time market data, financial calculations and other financial analytics to Wall Street firms through Bloomberg Professional Services. The information from its Bloomberg Terminal subsidises its media content, which allows it to build and engage with its global audience.
Since then, it has established a news agency (Bloomberg News), a global television network (Bloomberg Television), magazines, subscription-only newsletters, websites, and even a business consulting and professional advisory services unit in 2017. A media report noted how Bloomberg would “use data from across its assets” to inform its advisory services and leverage its media business in doing so.
Meanwhile, the Nikkei-owned Financial Times Group (FT Group) at its core is a daily business publication focused on business and economic current affairs.
With a prominent focus on financial journalism and economic analysis over generalist reporting, its developed a constellation of publishing houses catering to retail, personal and institutional finance audiences; digital information services for fund management professionals internationally; conferences products for the European pensions industry; and other sales and market intelligence for investment professionals.
It also collates and publishes financial market indices in partnership with the London Stock Exchange Group (LSEG) through the FTSE Group, that maintains index products such as FTSE All-Share Index, FTSE 350 and others. Through this business, it derives revenue from annual subscription fees and licensing for index-based products.
Its affiliate, Singapore-based DealStreetAsia, a financial news and intelligence platform acquired by Nikkei in 2019, specialises in private equity, venture capital, mergers & acquisition (M&A), public market/IPO and entrepreneur news.
At inception, it was targeted at a community of dealmakers and deal engineers, with plans for a data, conference, news media and transaction platform products. To date, it operates the marquee Asia PE/VC Summit, which competes with SuperReturn conferences, as well as a data platform that competes with various other players in the space. But the centrepiece of its brand is its editorial news platform. (Disclosure: I was an early employee of DealStreetAsia from 2014 to 2018).
In Singapore, examples already abound of companies like online property classified platforms PropertyGuru and 99.co, as well as personal finance product comparison platform Moneysmart Group, leveraging media operations to amplify the reach of their core products. The content engine acts as a funnel for consumers to their revenue-generating business.
Both Bloomberg and FT publish original and high-quality news content, offer conference and data products targeted at niche communities they have aggregated over the years. This is coupled with a complete and effective information chain across their ecosystem, which their data product subsidises.
Elsewhere in financial services, no-fee online brokerage Robinhood — revenue comes from interest earned on customers’ cash balances, selling order information to high-frequency traders and margin lending rather than trading fees — acquired daily financial news podcast and newsletter MarketSnacks in 2019 to amplify its outreach.
Yet another example of media properties figuring in ecosystems is UK-based active asset manager Abrdn (formerly Standard Life Aberdeen) acquisition of retail investing content platform Finimize in October 2021. Finimize, backed by London’s Passion Capital, provides investing tips to a retail investor community.
The acquisition saw Finimize “develop its product into a holistic information layer that sits above brokerage apps” and consolidate discussion and analysis of stocks into a mobile app. That same year also saw Abrdn acquire Interactive Investor, a subscription-based fund platform providing financial information and investment tools.
And in late November 2022, a report indicated US tech major Yahoo, majority-owned by Apollo Global Management, plans to develop “Bloomberg for retail trading” that will leverage Yahoo Finance data as part of a suite of trading tools. The company, which generates revenue primarily from digital advertising and subscription services, also plans to add on new commerce and transaction businesses.
Besides Yahoo Finance, the company maintains publishing assets such as TechCrunch, Engadget and Autoblog. Given this exposure to the technology and finance sectors, more publishing assets complementary to Yahoo Finance and its established media assets are possible.
In a December 2021 Bloomberg interivew, Reed Rayman, an Apollo partner who leads its tech and media investments, including Yahoo, shared: “Yahoo has multiple different businesses and that’s how we’re managing it and going to operationalize it. So as it relates to M&A, you could see Yahoo Finance going after fintech companies, or other retail, investor-oriented, finance-media companies, etc.”
“For Yahoo Sports, you could see us doing M&A as it relates to sports, betting, gaming, NFTs. You could also see us investing in content for the core homepage and news and entertainment-life business. We’re actively looking at digital media, content businesses. And then there’s a very large and scaled ad-tech business, which is a very hot sector.”
The Media Playbook of Andreessen Horowitz
From the start, the working style of Silicon Valley venture capital (VC) major Andreessen Horowitz (A16Z) stood out. The VC major is cognisant of the value of media machinery and its potential to drive brand and product growth for both itself and portfolio firms. A former Andressen Horowitz partner, Benedict Evans, even opined in a 2015 post: “a16z is a media company that monetises through venture capital.”
A 2010 Financial Times report observes: “The firm has a fairly unusual internal system. Instead of many general partners who each specialise in a given industry, Andreessen Horowitz has partners who all work on behalf of portfolio companies. Mr Andreessen said the attitude was modelled after that of firm limited partner Michael Ovitz, the former Hollywood agent who started Creative Artists Agency with a similar team approach.”
In 2021, A16Z launched a media brand called Future. Intended to augment a formidable media strategy, Future’s content is created by a blend of staff and external contributors and focuses on “future-focused informational and editorial content”.
Its initial leadership staff includes an editor-in-chief, executive editor and a managing editor, in a firm already reputed for its media management capabilities. This already aligns with a distinct working approach that emulates talent and sports agency Creative Artists Agency, as well as maintaining a talent database to help portfolio firms fill positions.
One report notes how the Future takes “the fundamentals of a corporate blog, but supersizing its ambitions to fold in outside voices and articles written by experts”, with the main aim of winning over founders rather than dealing with news reporting and analysis of the tech sector.
A16Z’s Margit Wennmachers, who oversees both marketing for the VC firm and editorial direction of Future, argues the publication maintains an editorial stance of “rational optimism about technology and the future”. While Future may wish to present a public stance of editorial autonomy, such a claimed position by Wennmachers is functionaly unworkable given its positioning as an in-house media brand.
A16Z’s traditional media strategy is built on three core elements. These involve positioning founders, with support from VC partners, in their own channels with media and content presence to be key amplifiers; thought leadership pieces to establish mindshare and position key team members as domain experts; and maintaining strong relationships with different media houses through developing durable relationships with journalists that operates on nuanced give-and-take principles.
A16Z already has stakes in ventures like audio-based social network Clubhouse and newsletter publishing platform Substack. With the launch of Future as its in-house and externally oriented media brand, the investment firm is clearly intent on building a deeper media footprint and strengthening its already significant influence on its information environment.
Media & The Power of Stories
In 1994, as the then-CEO of Pixar, Steve Jobs opined: “The most powerful person in the world is the storyteller. The storyteller sets the vision, values, and agenda of an entire generation that is to come, and Disney has a monopoly on the storyteller business. You know what? I am tired of that bullshit, I am going to be the next storyteller.”
More to the point, the belief in the power of stories the late Jobs expressed is backed by evidence of physiological and psychological changes brought about by storytelling. Stories change how the brain responds, stimulating emotions and the production of oxytocin, the hormone responsible for empathy and in-group bonding. And when shared through media channels, they can shape the world, and in the case of business media, the financial markets.
“The Impact of the media in financial markets: Evidence from newspaper strikes”, published in 2011 in the Journal of Finance, by corporate economist Joel Peress, dug into the causal impact of how media influence trading behaviour and trading volume. This is further backed by the findings of “First to Read the News: News Analytics and Institutional Trading”, published in 2015 by the Centre for Economic Policy Research, which indicates how news stories affect share prices and trading volumes.
Beyond the facts, fundamentally, stories seek to align the audience and the storyteller. But this relationship has challenges, given how both the audience and storyteller can evolve in different directions over time. The key is to find and sustain a unifying narrative. Great stories which are cogent, coherent and substantial are the anchors of enduring, resilient narratives.
The SGX Group operates in an information environment where narratives are biassed against it. Since the 2013 penny stock crash, the narrative of Singapore equities — regularly repeated by capital market professionals, remisiers and other stakeholders who built their careers in the 1990s and 2000s — has been amplified and embedded. And the story of Singapore equities and capital markets is at the core of the SGX story.
Now, the apparent lack of liquidity — despite robust loci of strength in equity derivatives, real estate and forex and growing share trading volume — remains an enduring story particular to the securities market. The securities daily average value (SDAV) — the daily securities turnover — can certainly be higher and has been trending upwards since 2018. But the dominant narrative remains one of a struggling exchange.
No one denies the structural shift to private equity worldwide coupled with the rise of domestic capital markets in the Asia Pacific has generated challenges for the SGX and Singapore’s securities market. But despite evidence to the contrary that suggests the incremental approach that SGXs’ management has adopted since 2015 is working — it arguably contributed to the Singapore stock markets outperformance in 2022 — this is inadequate to shift perceptions of a subpar Singapore equities market.
Looking at market data, the Straits Times Index (STI) returned positive gains of 3.80% as of end-September 2022 compared to the global benchmark of MSCI World Index with a 21.60% drop over the same period. A key element in Singapore’s favour is its main index, which is perceived as a dividend-paying index with historical yield averaging between 3% to 4%. Its constituents represent enterprises with regional exposure, including telecoms, banks, industrials, and real estate that trade at undemanding valuations.
Additionally, both price-to-book and price-to-earnings ratios of the STI are under 10-year historical averages. This signals undemanding valuations and safety in a turbulent market.With robust business fundamentals and positive prospects for long-term performance, the index also serves as a barometer for the Indo-Asia Pacific region.
As a basket of stocks, the STI represents enterprises with stable earnings streams and offers dividend income. It’s current investment narrative is that of a resilient core amid turbulent global markets that pays out steady dividends backed by healthy, stable earnings growth and strong cash flows. This renders them recession-resistant.
But for all its ability to punch above its weight — its the 24th largest stock exchange in the world with a market capitalisation of US$562.72 billion according to TradingHours.com and the 12th most valuable operator with a value of US$7.23 billion according to CompaniesMarketCap.com as at 5 December 2022 — the SGX has failed to fully leverage the power of business storytelling to build and sustain an engaging strategic narrative that enables it to compete globally.
Financial markets are complex, crowded and competitive, with brand recall concurrently and ironally both abundant and fleeting. It is necessary to establish and update enduring business narratives for a finance centre. This is not the case for Singapore securities, with Singapore’s own media ecosystem not helping the current state of affairs.
In its country profile, Reporters without Borders (RSF) observes: “Singapore boasts of being a model of economic development but it is an example of what not to be in regard to freedom of the press, which is almost non-existent.”
RSF notes: “Citizens have to deal with a media machine that is tightly controlled by the government. Harassment by the authorities has steadily silenced the few independent news websites, such as The Online Citizen, which was forced to close at the end of 2021”, while local media ownership is concentrated under Temasek Holdings-owned MediaCorp and Singapore Press Holdings (SPH), a private firm that has government-appointed directors. Additionally, self-censorship is widespread. Local independent media are also subject to systematic judicial and economic harassment from the authorities.
Global developments also affect it. An IESE report notes how worldwide, the media industry has “…shifted from producing content for a large population to targeting small groups of people who share common features”. Social media has fragmented audiences and created new information channels.
Locally, business publications are constrained to limits on press freedom resulting from political and historical factors, dislocations in the global media landscape, as well as limited human capital. This contributes to a lack of depth and scope when it comes to financial and business reporting, a gap in human capital for journalism as a whole — and business/finance journalism in particular — as well as varying sophistication in the content for the audience of information consumers locally and regionally.
Storytelling & Strategic Narratives
There is a compelling return on investment (ROI) for business storytelling that ranges from 6X to 28X, with increased financial results for companies that have a compelling purpose (i.e. business story) and actually invest in sharing it with the investor community.
The book ‘Corporate Culture and Performance’ discusses how purpose-driven companies — those with organisational cultures rooted in the organisational story and values — outperform peers that lack this, with superior revenue and share price growth.
Financial metrics and business evidence is compelling. But they are not the ultimate determinant to convince stakeholders. Stories that integrate data in their flow are crucial to secure buy-in, even as they shape the larger narrative. Fundamentally, public companies must invest in business storytelling, both to remain visible in the investment universe and as a form of investor relations. And the SGX must find and develop the means to harness this.
Stories are the building blocks of narratives, with the two being very different phenomena, according to John Hagel III, former co-chairman of the Deloitte Center for the Edge. Stories can engage audiences but are limited by their closed-ended nature, with a beginning, middle and end. A story resolved is a story over, with greater focus on the actors and agents than the audience. Beyond that, there is a limited opportunity for audience engagement.
In contrast, narratives are open-ended, without a clear resolution and an implicit “invitation to participate” for its audience to become stakeholders in the outcome. They also operate at personal, institutional and social levels, often emerging as instruments of policy change and effective learning tools. Its unfolding nature with undetermined outcomes is an invitation for the audience to participate in narratives.
Stories are the building blocks of narratives, delivering insights and ideas in ways that are engaging, persuasive and memorable. Compelling stories engage emotionally, rather than sticking to a factual basis, communicating a vision and representing a culture. Narratives are built and amplified by stories which are repeated and spread, creating brands with purpose and power. And such narratives build engagement and conviction.
Apple Inc’s “Think Different” slogan offered a broad narrative for the potential of technology to “break out of the conformity of mass society and express our individuality”, while personal narratives are a nucleus that drives individual behaviour.
Companies and brands distinguish themselves from peers and rivals through developing and sustaining compelling narratives. Key differentiators that compound over time, they convince different stakeholders to invest their trust and energy in specific firms over its competitors or peers.
Narratives also serve as resilient, evergreen assets that strengthen with regular use. Robust narratives must have a context for its content to strongly focus on the purpose of the story; a keen understanding of the audience; and relevant information the audience requires. Starbucks built its success employing its strategic narrative.
A corporate narrative is essential for companies and has a scientific basis corporate technocrats can appreciate. Humans subconsciously perceive companies as people, so in context, the narrative must be personal and individual, rather than institutional.
People wish to understand organisations and gain a sense for organisations as if they were individuals, in the same way that human relationships require reciprocity and authenticity. The narrative should say who you are, not just what you do.”
Hagel notes: “In the corporate context, a narrative should be about the customer, not the corporation. Building a successful narrative requires a deep understanding of your customers: How are their needs evolving? What are the big opportunities that would excite and inspire them? What are the challenges or obstacles they would confront in seeking to address those opportunities? What actions will they need to take in order to overcome those obstacles and achieve the opportunity? Are those actions something that the company could help them to pursue?”
Few companies excel at this. And now, customers (i,e. audience members) have access to options and information about these options. More broadly, people are keyed into how many companies pursue their interest at the cost of their customers. A “compelling corporate narrative with a long-term view that demonstrates a deep understanding of their needs and aspirations” helps audience members take actions to address their needs and aspirations. It creates authenticity in the connection, and an opportunity to both build and reinforce trust.
This common purpose anchors the strategic narrative and elevates the relationship with the audience. But alignment with brand DNA is vital. Organisations do not fundamentally change, much like people. A misalignment between the strategic narrative and brand DNA is inauthentic and self-sabotaging. At its core, articulating its strategic narrative enables any organisation to find meaning beyond shareholder value creation and execute on actions that are authentic, central to its corporate mission and anchor it in times of crisis.
Narrative Insight: The Starbucks Story
Despite vastly different sectoral domains and market capitalisations, the Starbucks Corporation offers ideas into developing and sustaining a robust strategic narrative that empowers the organisation and shapes external perceptions.
The strategic narrative and organisational culture of Starbucks enables it to shape its information environment and external perceptions. Indeed, the organisational culture that propelled Starbucks’ success is strongly rooted in the power of its corporate story.
Fundamentally, organisational culture is the catalyst for successful execution of a corporate strategy. Starbucks has the challenge of dealing with a diverse global audience of coffee drinkers with differing preferences across a fragmented international marketplace. But from the early to late 2000’s, Starbucks lost this global audience and the strategic narrative which anchored its success. It transitioned into a renewed period of growth through the 2010s under Howard Shultz.
Central to the Starbucks organisational narrative is the concept of a “third place” — a third place between home and work where people gather for conversation and community over drinks — a phenomenon that Schultz, the chairman and CEO of Starbucks from 1986 to 2000, from 2008 to 2017, and as interim CEO as at 2022 — discovered on his European travels. Currently the interim CEO, Schultz is to be succeeded by Narasimhan Luxman, former chief commercial officer of PepsiCo, as chief executive in April 2023.
“Sensemaking: What Makes Human Intelligence Essential in the Age of the Algorithm”, by Christian Madsbjerg, highlights how Schultz’s key insight at the core of Starbucks success was rooted in cultural intelligence. Madsbjerg writes, “Schultz’s insight required an understanding of Italian language and culture — he went to Italy and studied the famous Italian coffee bars before taking over at Starbucks — as well as an attunement to an unmet desire in the United States for more shared community spaces.”
This cultural insight and the application of the “third place” concept powered years of growth until Schultz stepped away from his role as chief executive in 2000. From 2000 to 2008, its financial performance as the company lost its ‘fidelity’ in an aggressive expansion drive that saw it cannibalise its own business.
As it scaled, familiarity and ubiquity worked against its strategic narrative and brand credibility. Shultzs’ return to the post of CEO from 2008 to 2017 refocused on the customer experience and “emotional connection” as the value proposition of the company he sought to revitalise.
Recalibrating and refocusing on its organisational culture, this saw Starbucks organisational culture enable its corporate strategy. It leveraged its distinct culture, a “reservoir of behaviours, traits, values and mind-sets that people in an enterprise share” to remain competitive even as its operating terrain changed and saw more coffee chains enter the market .
Elite military regiments (e.g. commandos) rely on specific organitional culture to drive their performance as a connected community. This is rooted in early indoctrination, as well as clear communication of the purpose and value system. Such cogency is critical to organisational and individual morale. This underpins the performance and pride of a community of individuals through times of adversity. And this is achieved through the use of storytelling to establish an organisational culture.
Business storytelling plays three key roles it plays in organisational culture. Human resource consultancy Human Synergistics notes how stories are the “programming language of culture”, serving as a code that reinforces underlying beliefs and assumptions. They reprogram organisational culture through the power of stories to tap into foundational beliefs, as well as inform, persuade and educate.
Stories can elevate and leverage purpose. An emotional connection to work is rooted in personal purpose. This facilitates the emergence of an “engaged corporate culture of ownership and shared responsibility” that decreases staff turnover and increases profitability. It also serves to drive drive the development of interpersonal relationships, with common purpose creating social bonds among individuals and across teams.
This connection to work and organisational sense of purpose propelled cohesive action guided by organisational leadership. Business storytelling skills enables cross-silo leadership, with leaders of different organisational functions able to share specialised knowledge to work in synergy.
Through the use of business storytelling in developing and sustaining a strategic narrative, Shultz managed to establish and sustain an organisational culture that drove the global growth of Starbucks.
The SGX Strategic Narrative?
What is the strategic narrative of the SGX and its audience? Are there any imperatives or advantages gained in retooling or shifting the narrative? Financiers writing investment memos and citizens advocating for policy change operate with different motivations and address different audiences. But they ultimately aim to develop compelling narratives meant to communicate, compel and engagae their readers.
A clear set of objectives informs how a compelling narrative is developed, while also allowing for organisations to identify optimal intervention points.
What are the rules and norms of the capital market space? The SGX Group understands this keenly, so it needs its strategic narrative to fit within that complex constellation of competing capital market narratives. From Hong Kong to Sydney, from New York to Zurich, there are competing agendas, regulations, capital flows and investment narratives that offer arbitrage opportunities.
The audience the SGX regular deals with is clear: entrepreneurs and enterprises; the segmented universe of retail investors, professional and accredited investors both domestic and foreign; policymakers in Singapore’s Ministry of Finance and the Monetary Authority of Singapore (MAS); and the array of stockbrokers, remisiers and broker-dealers operating within the ecosystems it links to.
There’s a need to calibrate the structure of a story, set the props for the stage, identify what are the compelling points and establish a plot that this diverse audience is responsive to. The SGX has to manage relations with a complex and diverse investor audience. So what are the narrative pillars of a strategic narrative for it to be coherent, relatable and vivid?
What a strategic narrative is not is a public relations instrument communicating the organisation’s vision and strategy through a mission and vision statement. A strategic narrative engages stakeholders and synchronises a firm’s values to show employees and leaders their roles and purpose; drive change when necessary for a pivot/transformation; and guide communications in times of crisis or celebration.
Beyond the benefits of connecting and captivating your customers, a strategic narrative is essential to inspire employees, excite partners, and engage influencers, given how the aspirational aspect of such a narrative is critical. Starbucks aspired to offer customers a ‘third place’. So what is the aspirational element of the SGX story?
The narrative across its dimensions (i.e. the story, language and tone) must be legitimate and resonate across the different layers of the organisation. Input from leadership is key and it needs to synchronise the internal pulse of the organisation with the external perception projected to the world. This translates into impact when the messaging is authentic, accurate, and persuasive.
Internal insight of the SGX’s mission, values and what it represents; and external insights of how the stock exchange is perceived in the context of the finance centre, stakeholders, and customers; will enable an aspirational strategic narrative to be built. The processes that yield these insights and other relevant data will indicate a path forward.
For instance, broadly speaking, equity capital markets and the larger stock market are fundamentally about wealth creation, accumulation and distribution. They are a channel for distributing capital to the public, private and household sectors, and a focal point for enterprises and entrepreneurs to mobilise capital.
In this context, the stock exchange is a conduit of capital flows, with currency representing wealth which is fundamentally an extension of human desires. These desires fluctuate with emotion and mental states across the lifespan, rendering a stock exchange an engine of energy for people to maintain or pursue specific lifestyles. In this sense, the stock exchange is an engine of wealth to mobilise and distribute capital.
Is this something to be factored into the strategic narrative of the SGX, operating as it does in a capitalistic society where many have the logical failure of understanding the accumulation of currency to be wealth, rather than a form of energy to pursue certain lifestyles? In this context, can the SGX be an investment platform to address the wealth gap that is emerging in a time of megathreats?
The perceptions of the Hong Kong Stock Exchange (HKSE) are intimately linked to its role as a vital gateway in the economic ascent of China and a gateway to a restricted market. The perceptions of the NASDAQ and NYSE are as vibrant, dynamic marketplaces for US and international enterprises to tap the vibrant, diverse investor universe of US capital markets for generous valuations and liquidity, especially in the technology sector. The perceptions of the ASX are of a stronghold for commodities and resources, with more recent years seeing ‘Nasdaq of the Asia-Pacific’ being added to its external perceptions.
Starbucks success highlights the enduring advantage of a compelling strategic narrative, with context determining its content and perceptions, internal and external. It’s grounded in a context of human connection; centred on collaboration for a shared purpose.
So what are the pillars of an SGX strategic narrative? And how can this shape its external perceptions and communicate its relevance as a node for accessing the wealth of the Asian economy story? These are questions only the organisation and its leadership can answer.
Possible Implementations?
If the SGX Group does decide to explore leveraging the power of media as an asset in its own corporate ecosystem, it’s best off pursuing a two-pronged strategy. It can establish its own in-house media brand à la Andreessen Horowitz and a separate tech-enabled finance-media as an affiliate company, holding a stake through a subsidiary (i.e. Asia Gateway Investments) or other special purpose vehicle (SPV).
This would enable a dual approach of enabling the SGX to pursue its corporate agenda’s, while at the same time also having an affiliate firm that can maintain editorial independence and serve as an autonomous stakeholder in the market.
There is already a precedent with an SPV called SEL Holdings, which is wholly-owned by Singapore state investor Temasek Holdings, operates under regulations that restrict the exercise of votes attached to shares of financial exchange companies. It holds the shares for the benefit of the Financial Sector Development Fund (FSDF), which was granted the option in early 2022 to generate income with an aim to growing Singapore’s finance sector.
Analysis of its financial statements and discussions with senior executives within the SGX Group indicate it’s sitting on a significant cash pile. It has no apparent ‘chief entrepreneur’ in its C-suite nor a separate corporate venture unit. Rather, its corporate development department is committed to a highly incremental approach to developing its competences and establish a flywheel effect.
An interesting model for it to consider is Canada-based Newbridge Networks’ affiliate model, which grants considerable flexibility. Upon launch in 1992, it implemented an affiliate program that saw over 20 startups seeded. These affiliate companies benefited from direct investment by Newbridge which typically took between 30% to 35% equity in the company.
They developed products compatible with Newbridge equipment and its digital switching core and could leverage its network and salesforce. Additionally, the management enjoyed mentoring and ongoing support, while back office functions were handled by Newbridge.
Founding employers owned equity and operated with significant independence from the parent, as well as being able to raise their own external venture funding.
The outcome of the affiliate programme? Eight trade sales, six IPOs, two companies merged with other portfolio companies and more than 4000 jobs created. Newbridge bought back three affiliates while two ventures failed. Newbridge Networks’ affiliate model produced over US$1 billion in value for an initial investment cost of less than US$100 million.
The greatest benefit of this affiliate programme for Newbridge Networks’ was how it enabled the company to undertake high risk projects. It employed off-balance sheet financing, while also enabling the buildout of an ecosystem around its core products and services. It also opened up channels for product partnerships and customer acquisitions in the process.
An alternative is emulating how Yahoo utilises its constellation of media publications like TechCrunch (technology companies & startups) and Endgadget (consumer tech). This content attracts and engages different segments of the consumer audience, funnelling them into the Yahoo digital advertising network to generate revenues through advertising and subscriptions.
Launching a media property serves multiple beneficial outcomes. There are manifold advantages, whether it’s boosting trading volumes, enhancing the market visibility of listed companies, safeguarding against corporate misconduct or influencing the information environment and influencing market narratives.
Summary
The very process of launching a media property and relooking its strategic narrative opens up new growth possibilities for the SGX Group and its corporate ecosystem. A robust, enduring investment narrative supported by evidence-backed business stories can engage domestic investors and revive the securities segment of the finance centre.
The narrative of the Indian rupee is one such example. Prevailing geopolitical uncertainty and rising interest rates globally means the interest differential between emerging economies (i.e. medium to high risk) and developed economies (i.e. risk-free market) has narrowed.This leaves investors with little incentive to put capital in economies perceived as ‘risky’ where higher returns are absent.
This is hazardous as it leads to outflows, where assets denominated in emerging market currencies are sold off and puts pressure on assets denominated in such currencies to depreciate. Such outflows are often short-term investment flows that are subject to market sentiment and global factors.
Yet despite global volatility, Indian equities have proven resilient. Its investment narrative is one of strength as as indicators suggest theIndian economy hits escape velocity and cements Indian stocks as a haven among the major global economies at this time.
Such resilience in Indian stock markets is underwritten by substantial net-purchases of domestic institutional and retail investors, whose sentiment reflects confidence in the market narrative. It also offsets any equity sell-offs by foreign institutional and retail investors, a pattern mirrored in Southeast Asia. This financial commitment represents investors buying into the investment narrative that these markets offer. Such commitment from domestic investors with conviction in domestic securities is necessary for any market to remain resilient.
Singapore’s strategic narrative has historical underdog elements as a former British colony that evolved into a global finance centre, coupled with strategic economic geography as well as scope and ecosystem economies.
The narratives of the SGX and Singapore securities are intertwined, being able to ‘punch above its weight’, a core element of Singapores’ story. If Singapore is to retain its accolades as a finance centre, supporting and rejuvenating the SGX’s equities business with a forceful, cogent portrayal that appeals to investors domestic and foreign is critical.
