SGX to boost lucrative derivatives business

  • Business
  • Friday, 07 Jun 2019

The move comes days after India

SINGAPORE: Singapore Exchange Ltd (SGX) aims to add products to its lucrative derivatives business and offer South-East Asian unicorns a platform to list shares and bonds, in a multi-asset strategy aimed at sustaining growth, its chief executive said.

“There’s always the focus around IPOs and associated capital markets but today, participants on our exchange look beyond just the stock market,” said Loh Boon Chye in an interview.

“They think about us as a derivatives, foreign exchange, commodities and freight market and also increasingly a fixed income market,” Loh told Reuters.

SGX’s multi-asset strategy comes as the bourse is overshadowed by Chinese-led multi-billion-dollar fundraising at Hong Kong Exchanges and Clearing Ltd (HKEX) while bourses such as Thailand emerge as strong rivals.

Average daily securities turnover at SGX was US$791mil in May while the figure was US$1.8bil for the Thai exchange, and US$12.4bil for HKEX, data from Refinitiv shows.

SGX has seen trading volume drop after a penny stocks crash in 2013 battered investor confidence, while weak valuations have led to a spate of delistings.

“IPO is not a destination, it’s only a process. Our secondary fundraising typically is three to four times of the IPO market,” said Loh, adding that bond listings were also a key part of SGX’s offerings.

SGX’s revenue from the trading of equities, commodities and foreign exchange derivatives jumped 30% in June-March, making up 50% of the total. Revenue from its equities and fixed income segment fell 16% and accounted for 39%.

Growing demand from international investors to hedge exposure to iron ore, coal, Indian stocks and other asset classes pushed SGX’s revenue to a record-high last year.

“We will be looking to launch single stock futures. We have that on India and will look to launch more, not just on our Singapore market but we can launch it on other equity markets,” said Loh, 55, a former SGX director.

In recent years, SGX has improved its market liquidity, strengthened its regulatory framework and introduced a dual-class share system with an eye on potential IPOs from South-East Asian startups with billion-dollar valuations such as ride-hailing firms Grab and Go-Jek and e-commerce company Tokopedia.

Even so, analysts said the exchange will have difficulty replicating in other sectors its success as a global venue for business trusts and real estate investment trusts (REITs). — Reuters

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