The first question almost every shareholder asks is the one we are least able to answer in a sentence: how much can I borrow against my shares? The honest reply is that loan-to-value is not a property of our firm or a figure on a rate card — it is a property of the specific SGX counter, read on the day it is read. Two holders, each with positions worth the same on paper, can be quoted advances that differ markedly. This note explains why, and what actually moves the number.
What LTV is measuring
Loan-to-value expresses the advance as a proportion of the market value of the charged shares. But the figure is really a measure of confidence — the lender's confidence that, if the facility ever had to be unwound, the position could be realised in an orderly way at a price close to the one used to size the loan. Everything that erodes that confidence pulls the LTV down; everything that supports it allows the LTV to rise. The question is never "what is the share worth today" so much as "what could it reliably be worth on the day it might have to be sold, and how quickly."
The drivers, and why they pull in the same direction
A handful of characteristics do most of the work, and they tend to reinforce one another rather than offset.
What sets the advance on an SGX share
- Free float — the proportion of shares genuinely available to trade, rather than locked up with insiders. A thin float means a position is harder to exit without moving the price.
- Average daily traded value — how much of the counter changes hands on a normal day. It tells the lender how many days it would take to realise the collateral without becoming the market.
- Realised and implied volatility — how far the price has actually moved, and how far the option market expects it to move. Volatility is the buffer the LTV has to leave room for.
- Market capitalisation — a large-cap STI constituent behaves differently under stress from a small-cap, even before liquidity is considered.
- Concentration — how the charged stake compares with the counter's daily volume and total float. A block that is large relative to the market is its own risk.
- Sector — a defensive REIT or bank trades with a different rhythm from a cyclical commodities or offshore name; the sector colours every figure above.
These drivers compound. A liquid, deep-float blue chip with low volatility scores well on every axis at once, and the advance can be sized generously. A concentrated stake in a lightly-traded small-cap scores poorly on several axes together — thin float, low traded value, higher volatility, a block that is large against the market — and each weakness amplifies the others. That is why the same nominal position size can support very different advances.
Why a founder's block is read differently from an STI name
It is tempting to think a SGD 50 million holding is a SGD 50 million holding. It is not. Suppose one is a sliver of a heavily-traded index constituent and the other is a founder's controlling block in a closely-held company. The index sliver can, if it ever came to it, be sold into a deep and continuous market over a manageable horizon. The founder's block cannot: it is large relative to daily volume, much of the register is held by parties who will not be selling alongside, and an attempt to realise it quickly would itself depress the price. The lender prices that reality. Concentration is not a defect we penalise reluctantly — it is simply a different collateral, and it earns a different LTV.
The comparison below sets the two profiles side by side on the drivers that matter.
| Driver | Liquid STI blue-chip | Concentrated small-cap stake |
|---|---|---|
| Free float | Deep — wide ownership base | Thin — much held by insiders |
| Daily traded value | High — continuous market | Low — patchy turnover |
| Volatility | Lower and well-behaved | Higher and more abrupt |
| Stake vs. daily volume | Small — sells without moving the price | Large — its own market impact |
| Indicative LTV | Higher end of the range | Lower, with a wider buffer |
| Monitoring intensity | Lighter | Closer, with tighter triggers |
Buffers, top-ups, and monitoring
The LTV set at the outset is not a figure that is then forgotten. The gap between the advance and the collateral value is a deliberate buffer, and it is monitored against the live price for the life of the facility. If the share falls and the buffer is consumed beyond an agreed point, a margin call follows — a request to restore the cushion, typically by posting additional collateral or by a partial repayment. A more volatile or concentrated counter is given a wider buffer and watched more closely, precisely because the price can travel further between observations. A liquid blue chip can be run with a thinner buffer because the next reliable exit is never far away. The monitoring is not adversarial; it is the mechanism that keeps the facility away from the disorderly outcome that no one wants.
Why no single LTV exists
Put together, this is why we decline to publish a headline number. A single advertised LTV would be either too aggressive for the concentrated, illiquid positions that are our core work, or too timid for the liquid index names — and dishonest for both. The figure can only be set after the specific counter has been read on its free float, its traded value, its volatility, the size of the stake against the market, and the sector it sits in. That is also why an indicative figure can be issued quickly once we have seen the position: the inputs are observable, and the judgement is one we make every week.
LTV is the most visible term, but it is downstream of liquidity and volatility, and it is bound up with the recourse the facility carries. A conservatively-set advance is the same discipline that keeps a margin call from ever arriving — which is why the LTV question and the recourse profile of a facility are best decided together, not in sequence.