IN HIS commentary &ldquo Referee kayu? Like in football, focus in the market should be on the &lsquo play&rsquo , not the refereeing&rdquo (BT, Jan 27), Tan Boon Gin, CEO of Singapore Exchange Regulation (SGX RegCo), said that not only has the frontline market regulator fine-tuned its trading queries &ndash which has helped reduce the number issued &ndash it is also conducting a review of the entire trading query regime this year because of public feedback that trading and SGX intervention can have &ldquo a chilling effect&rsquo &rsquo on the market.

 

This would surely be music to the ears of the many brokers who have long complained of over-regulation, which some claim to be one of the major factors behind the local market&rsquo s underperformance in recent years.

 

&ldquo Let animal spirits run unfettered.&rdquo Or: &ldquo Other markets don&rsquo t over-regulate. If we do, then people will simply take their business elsewhere.&rdquo These are some of the comments from observers clamouring for a loosening of the regulatory reins as a first step towards improving conditions in the Singapore market.

 

By the same token, though, there may be some who see Tan&rsquo s declaration as a retrograde step as far as ensuring proper market discipline is concerned.

 

After all, if a stock were to suddenly move by a large percentage in either direction for no apparent reason, then surely a query is warranted to at least try to shed light on why?

 

When I was a market reporter at The Business Times, I used to receive calls asking why SGX RegCo had not queried some unusual price movements while querying others of a similar nature.

 

In other words, my experience has been that not all market participants would welcome fewer trading queries.

 

Supporters of less regulation might assert that in almost every trading query case in the past, the replies have invariably been that the company concerned knew of no reasons why its shares were in play. If so, why bother querying in the first place?

 

The reason is that even if a query results in no new information being shared, the very act of asking is actually designed to signal to the market that regulators are either watching developments surrounding the stock, or already aware that something not quite kosher could be going on.

 

A routine trading query could then be escalated to a &ldquo Trade with Caution&rdquo alert, which is an even stronger signal that regulators are not wholly comfortable with developments surrounding that stock or the parties behind the trading.

 

It could also mean that the matter has been passed up the regulatory chain for closer investigation. Quite reasonably, SGX RegCo issues its &ldquo Trade with Caution&rdquo notices sparingly, given the seriousness of the intended signal.

 

There is therefore a fine balance to be struck between allowing &ldquo animal spirits to run unfettered&rdquo and ensuring a fair and orderly market where everyone operates on a level playing field.

 

While much would depend on the judgment of regulatory staff, issuing fewer trading queries for unusual price movements is a step in the right direction, especially considering the high level of sophistication in current tracking and surveillance systems.

 

Similarly, a public that has been calling for a lighter regulatory touch should also understand that when a trading warning is actually issued, it means that something significant is afoot and that sterner regulatory action could be forthcoming.

Bank cites potentially stronger IPO pipeline, safe-haven factor and robust cash equities business

 

MAYBANK upgraded its call for the Singapore Exchange (SGX) : S68 +10.07% to &ldquo buy&rdquo and raised its price target for the stock on Friday (Feb 7).

 

That comes after SGX on Thursday posted a net profit of S$340 million for the first half ended December, up 20.7 per cent from S$281.6 million in the year-ago period. Investors poured into the stock on Friday, pushing the counter up 10.1 per cent by the close to S$13.99.

 

In a Thursday report, Maybank said that increased global geopolitical volatility, and monetary and fiscal uncertainty &ldquo should give SGX a competitive advantage as a deeply liquid risk management venue&rdquo .

 

Trade war volatility under US President Donald Trump&rsquo s administration could drive demand for the bourse&rsquo s platform given the &ldquo strong levels of liquidity offered in key instruments&rdquo , it said.

 

&ldquo One month into the Trump administration, trade war driven volatility and uncertainty &ndash especially in Asia &ndash is showing no signs of abating. In fact, risks are rising. We believe this could drive further demand for SGX&rsquo s platform,&rdquo said Maybank.

 

Maybank lifted its target price for the counter to S$14.16 from S$10.12 &ndash 3.8 per cent above the price of S$13.64 that the counter was trading as at 1.29 pm. The bank also raised estimates for the bourse&rsquo s profit after tax for FY2025 to FY2027 by 16 to 24 per cent, following its H1 earnings results. 

 

It said: &ldquo While a higher dividend is unlikely, positive tailwinds as a regional safe haven and risk management venue should catalyse SGX going forward.&rdquo

 

The &ldquo stronger cash equities velocity and derivatives demand&rdquo that drove the bourse&rsquo s better-than-expected H1 performance will likely persist and should make it a competitive trading venue, the bank added.

 

Maybank raised its estimates for the cash equities segment&rsquo s revenues for FY2025 to FY2027. The move comes as it thinks the segment could be boosted by its &ldquo strong operating leverage&rdquo . 

 

IPOs

Noting the 9 per cent rise in SGX&rsquo s H1 securities daily average volume (SDAV) from the year-ago period, Maybank expects drivers behind the elevated SDAV &ndash safe-haven flows amid geopolitical risks, higher rates and corporate capital returns &ndash to persist moving forward. 

 

That could catalyse IPOs, Maybank said. It is &ldquo optimistic&rdquo that the Monetary Authority of Singapore&rsquo s (MAS) equity market review could &ldquo revive volumes&rdquo .

 

The MAS&rsquo market review group was set up in 2024 to revive the local stock market which has weathered a listing drought for several years. 2024 yielded only four IPOs, the lowest in more than a decade &ndash making SGX South-east Asia&rsquo s worst-performing bourse for the year in terms of IPOs and funds raised.

 

In recent years, the SGX experienced a string of delistings, lost listings to other bourses &ndash with companies such as Grab and Sea opting to list in the US &ndash and faced competition from alternative fundraising methods such as private equity.

 

However, the bourse said in its earnings briefing on Thursday that it has observed improved momentum and is hopeful that 2025&rsquo s IPOs will exceed the previous year&rsquo s.

 

The market review group is studying ideas to draw new listings, raise investor participation and improve the IPO process and it aims to complete its report by August. 

 

Maybank raised its forecast for the number of IPOs in 2025 to 10 from its previous estimate of six and expects an IPO pipeline spanning larger real estate investment trusts, healthcare, and new economy candidates. 

 

Remarking that the derivatives segment could be boosted by volatility, Maybank has upped its estimates for fixed income, currencies and commodities derivatives revenues by 5 to 11 per cent.

 

RHB maintains &ldquo neutral&rdquo call 

RHB analyst Shekhar Jaiswal reiterated his &ldquo neutral&rdquo rating on SGX, citing H1 core profit that was &ldquo in line with estimates&rdquo . He foresees the bourse&rsquo s profit after tax and minority interests declining in H2 and its earnings growth moderating beyond FY2025.

 

In a Friday report, Jaiswal stressed that any &ldquo material improvement in SGX&rsquo s moderating earnings growth outlook&rdquo would depend on numerous factors that are &ldquo difficult to pencil into our estimates right now&rdquo . 

 

These include elevated local equity market sentiment, an increase in new IPO listings, successful new product launches, earnings-accretive acquisitions, and a favourable outcome for the ongoing market review exercise. 

 

&ldquo While we expect the SDAV to remain flat, the derivatives volume should continue to grow during FY2026 to FY2027,&rdquo said Jaiswal. 

 

Fixed income, currencies, and commodities revenue should clock a 12 per cent compound annual growth rate for FY2024 to FY2027, he said.

 

At under 50 minutes, Singapore Exchange &rsquo s (SGX) Feb 6 results briefing was the shortest in recent memory, as analysts had few questions for the bourse operator&rsquo s highest first-half revenue and net profit since listing in 2000.

 

SGX posted adjusted net profit of $320.1 million for 1HFY2025 ended Dec 31, 2024, up 27.3% y-o-y while adjusted ebitda was up 23.9% y-o-y at $426.9 million. Adjusted earnings per share was 29.9 cents, up from 23.5 cents this time last year.

 

Adjusted ebitda, net profit and earnings per share exclude &ldquo certain non-cash and non-recurring items that have less bearing on SGX Group&rsquo s operating performance&rdquo , says SGX, which &ldquo better reflect underlying performance&rdquo .

 

Still, the results were positive even without the adjustments. Unadjusted ebitda was 23.4% higher y-o-y at $425.3 million while net profit would have risen 20.7% y-o-y to $340 million and earnings per share would have come in at a higher 31.8 cents for 1HFY2025.

 

SGX also announced a new way of reporting revenue, which chief financial officer Daniel Koh says &ldquo aligns with global practice&rdquo . The presentation of revenue and expenses has been revised in FY2025 such that transaction-based expenses are netted off against operating revenue to show net revenue.

 

According to the bourse operator, this net revenue allows for &ldquo better comparability across peers&rdquo . After deducting transaction-based expenses, net revenue increased 15.6% y-o-y to $646.4 million, with growth in all business segments. This figure includes associated treasury income, which grew $1.4 million y-o-y.

 

SGX&rsquo s board of directors has declared an interim quarterly dividend of 9.0 cents per share, up from 8.5 cents this time last year and unchanged h-o-h. This is payable on Feb 21. This brings total dividends in 1HFY2025 to 18.0 cents per share.

 

Though dividends are in line with expectations, some analysts wish SGX had been more generous.

 

RHB Bank Singapore analyst Shekhar Jaiswal, for one, said in January that he expected &ldquo strong&rdquo earnings growth in 1HFY2025, though he only forecast 17.5 cents in dividends.

 

With this earnings beat, however, Maybank Securities calls the 1HFY2025 dividend &ldquo disappointing&rdquo .

 

Likewise, Citi Research analyst Tan Yong Hong commends SGX&rsquo s &ldquo overall results beat&rdquo , with 1HFY2025 net profit at 57% of his full-year forecast, though quarterly dividends were only &ldquo in line&rdquo with expectations.

 

That said, Tan notes that SGX has &ldquo no commitment to a specific payout ratio&rdquo . Back in August 2023, SGX raised its quarterly dividend for the first time in 12 quarters to 8.5 cents for 4QFY2023, and also announced its target to raise dividends by &ldquo mid-single-digit&rdquo in CAGR &ldquo over the medium term&rdquo . Its 1HFY2025 dividend per share is up 5.9% y-o-y.

 

Higher revenue across the board

 

SGX reports revenue across four segments: fixed income, currencies and commodities (FICC) cash equities equity derivatives and &ldquo platform and others&rdquo .

 

First, revenue from SGX&rsquo s FICC segment increased 13.4% y-o-y to $159.1 million and accounted for 24.6% of total net revenue in 1HFY2025.

 

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Fixed income net revenue increased 22.8% y-o-y to $4.8 million. There were 395 bond listings raising $145.6 billion in 1HFY2025, compared to 489 bond listings that raised $131.7 billion a year earlier. Meanwhile, currencies and commodities net revenue increased 13.1% y-o-y to $154.3 million.

 

The increase in trading and clearing revenue was mainly from higher volumes in over-the-counter forex (OTC FX), currency derivatives and commodity derivatives, says SGX. OTC FX net revenue increased 35.7% y-o-y to $55.0 million.

 

OTC FX headline average daily volume (ADV) increased 35.4% y-o-y to US$136 billion ($183.73 billion).

 

Currency derivatives volumes increased 43.2% y-o-y to 33.0 million contracts, mainly due to higher volumes in INR/USD and USD/CNH FX futures contracts.

 

Commodity derivatives volumes increased 14.5% y-o-y to 32.9 million contracts, mainly due to higher volumes in iron ore derivatives, says SGX.

 

Second, SGX&rsquo s cash equities segment, which is the focus of an ongoing equities market review group, posted 22.3% higher net revenue of $192.6 million, accounting for 29.8% of total net revenue.

 

SGX recorded five new equity listings in 1HFY2025, which raised $19.7 million. This is down from four new equity listings that raised $19 million in 1HFY2024.

 

Secondary equity funds raised were $3.1 billion, up from $0.6 billion this time last year.

 

Securities daily average traded value (SDAV) surged 31.2% y-o-y to $1.3 billion and total securities traded value increased 34.4% y-o-y to $162.8 billion.

 

This was made up of cash equities, where traded value rose by 35.3% y-o-y to $156.9 billion and other products, where traded value increased 12.8% y-o-y to $5.9 billion. There were 129 trading days in 1HFY2025, up from 126 this time last year. 

 

SGX CEO Loh Boon Chye notes &ldquo increased participation&rdquo in cash equities &mdash &ldquo not just in the banking stocks, but I think across the REITs and the [Straits Times Index]&rdquo .

 

&ldquo We will build on this momentum,&rdquo says Loh in response to The Edge Singapore. &ldquo There will be more product launches, whether that&rsquo s [in] the Singapore Depository Receipts (SDRs), Daily Leverage Certificates or ETFs. We are also looking to continue to onboard retail brokers, outreach to institutions [in both] research and education.&rdquo

 

SGX launched Hong Kong SDRs on Oct 30, 2024, for five mega-cap companies: BYD, HSBC, Bank of China, Alibaba and Tencent.

 

Third, equity derivatives net revenue increased by 21.6% y-o-y to $177.4 million and accounted for 27.4% of total net revenue. An 18.8% y-o-y increase in trading and clearing revenue was mainly driven by a 17.4% y-o-y increase in total equity derivatives volumes.

 

Higher volumes of FTSE China A50, GIFT Nifty 50, MSCI Singapore and FTSE Taiwan index futures contracts were partially offset by lower volumes of Nikkei 225 index futures contracts, says SGX.

 

The average net fee per contract for equity, currency and commodity derivatives was comparable at $1.30, largely flat from $1.31 this time last year.

 

Finally, SGX&rsquo s &ldquo platform and others&rdquo segment saw 1.7% higher net revenue in 1HFY2025, accounting for 18.1% of total net revenue.

 

Market data revenue rose 3.8% y-o-y to $25.1 million connectivity revenue rose 8.7% y-o-y o $41.8 million indices and other revenue fell 3.7% y-o-y to $55.3 million and transaction-based expenses rose 4.3% y-o-y to $5.0 million.

 

Total expenses were comparable at $263.1 million in 1HFY2025, largely flat from $262.8 million this time last year. Higher variable staff costs were mainly offset by lower depreciation and amortisation and fixed staff costs, says SGX.

 

Adjusted total expenses are comparable at $257.3 million, from $256.4 million in 1HFY2024.

 

SGX&rsquo s total capital expenditure was $22.1 million in 1HFY2025, up 19.5% y-o-y. &ldquo We expect our expenses and capital expenditure to be at the lower end of our FY2025 guidance, previously guided at a 2%&ndash 4% increase and between $70 million [and] $75 million respectively,&rdquo says SGX.

 

Succession plans, market review

 

CEO Loh also fielded a pointed question from the media: Does he have a succession plan in place as he approaches his 10th year leading the exchange?

 

&ldquo I hope I can do better,&rdquo quipped Loh after some gasps and laughs from analysts and SGX executives. &ldquo It&rsquo s not about the CEO it&rsquo s about the team. It&rsquo s a strong team. When the time comes, the board will make the decision. But as of now, I think the team is driving and gelling well, and we hope to continue to improve on our results.&rdquo

 

SGX&rsquo s latest annual report, released Sept 16, 2024, contained separate letters from Loh and chairman Koh Boon Hwee. While both leaders discussed the equities market review group, which had been launched just a month prior, it marked the first time since the FY2010 annual report that an SGX chairman had written separately from the CEO of the exchange.

 

Loh also sidestepped a follow-up question about whether the bourse would appoint a successor from within its ranks, repeating: &ldquo We&rsquo re working well as a team.&rdquo

 

CFO Koh took on the role on Dec 1, 2024, replacing Ng Yao Loong after four years. Ng, now head of equities, was present at the briefing but was not seated onstage.

 

Loh also declined to discuss the status of the review group, which has yet to make any recommendations in the six months since its launch, instead saying &ldquo the ecosystem is very heartened that the review group is taking a very holistic view&rdquo .

 

Pol de Win, who is in charge of attracting new listings as head of global sales and origination, says there is a &ldquo very healthy group of new economy companies&rdquo in the IPO pipeline.

 

According to him, a number of &ldquo good quality&rdquo and &ldquo sizeable&rdquo REITs are starting to look at the market, along with companies in the consumer and healthcare sectors.

 

Shares in SGX closed at $12.43 on Feb 5, prior to the release of its results. SGX shares climbed 17 cents, or up 1.4%, to $12.60 prior to the midday break on Feb 6. The share price has risen some 34% over the past year. 

More companies could be listing here in 2025 with the Singapore Exchange (SGX) seeing an improved pipeline of initial public offerings (IPOs), said the bourse operator, which has weathered a tepid market and a slew of delistings in recent years.

 

SGX chief executive officer Loh Boon Chye said in an earnings briefing on Thursday (Feb 6): &ldquo We observe improved momentum. There are deals that are being worked on by advisers, by banks, together with the issuers.&rdquo

 

Pol de Win, head of global sales and origination at SGX, added at the briefing that he hopes the number of listings in 2025 will exceed that of last year.

 

He said that SGX has seen issuers becoming more active.

 

&ldquo Investor confidence is clearly coming back. Equity levels are generally quite high, the rates outlook is stable, and in some cases, have been declining.&rdquo

 

At the same time, he said, private capital providers have an &ldquo increasing need&rdquo to recirculate net capital, and to create liquidity for their own limited partners. &ldquo And so we really expect that the IPO market, generally in the world, is coming back and we will benefit from that as well.&rdquo

 

Singapore has long suffered from a stagnant market with low liquidity, as it struggled to draw companies to list here. Last year was a standout year, with nearly 17 per cent returns, placed it among the top performers in the region. However, it still had more delistings than IPOs &ndash 20 companies delisted in 2024, compared to four new listings.

 

The Monetary Authority of Singapore has set up an equities market review group to revive the local market. It is studying ideas to encourage listings, increase investor participation, and to improve the listing process, among other moves. This group aims to complete its report by August.

 

While Loh said that he could not give an update on the group&rsquo s review yet, he added: &ldquo I think it&rsquo s important that for the Singapore stock market to grow and sustain its trajectory, all structural issues, policy issues, have to be holistically addressed &ndash including by SGX, all participants in the ecosystem, policymakers and regulators.&rdquo

 

SGX has lost listings to, notably, the US, with companies like Grab and Sea choosing to list there. However, it is not the only market facing this issue: the London Stock Exchange has also lost out to the US in the competition for listings.

 

Singapore is facing competition from alternative fundraising methods such as private capital as well, industry watchers have noted. EY data showed that the number of PE deals in South-east Asia soared 103 per cent to 67 in 2024 the total US$15.8 billion in capital deployed last year was more than treble the US$4.9 billion in 2023.

 

The four listings in 2024 raised a total of S$45.9 million, bourse data indicates. This was sharply lower than the S$580.3 million raised through 11 IPOs in 2022.

 

But things could be looking up. Companies in SGX&rsquo s &ldquo sweet spot&rdquo are increasingly interested in listing in this region, de Win said.

 

&ldquo The companies, starting with market caps from S$200 million, S$300 million up to S$3 billion to S$5 billion, are increasingly convinced that at least a listing in Asia and this part of the world is the right thing for them to do,&rdquo he said.

 

He added that companies interested in listing are those considered to be new economy, tech-related and high-growth in nature. They also include real estate investment trusts, which he said are &ldquo good quality&rdquo and a sizeable issuance, and from other sectors such as consumer and healthcare.

 

SGX has also been driving more inflows into the local market via Singapore Depository Receipts (SDRs), as well as its ETF Links with Shenzhen and Shanghai that offer investors in both Singapore and China mutual access to both markets , and will seek to have new products in such areas, it said.

 

The ETF Links have pulled in the biggest regional inflows in the past six months, with assets under management jumping from S$100 million at the end of 2023 to $500 million at the end of 2024, according to SGX.

Cash equities and equity derivatives segment leads the group&rsquo s broad-based performance

 

THE Singapore Exchange : S68 +0.81% (SGX) on Thursday (Feb 6) posted a net profit of S$340 million for the first half ended December, up 20.7 per cent from S$281.6 million in the previous corresponding period.

 

Earnings before interest, taxes, depreciation and amortisation (Ebitda) for H1 grew 23.4 per cent on the year to S$425.3 million.

 

Earnings per share (EPS) stood at S$0.318, up from S$0.263 in the year-ago period.

 

After adjusting for certain &ldquo non-cash and non-recurring items&rdquo that have less bearing on SGX&rsquo s operating performance, its net profit would have risen 27.3 per cent to S$320.1 million, and its EPS would have been S$0.299.

 

SGX&rsquo s board of directors has declared an interim quarterly dividend of S$0.09 per share, up from the S$0.085-per-share payout in the previous corresponding period. This brings total dividends in H1 FY2025 to S$0.18 per share.

 

The interim quarterly dividend will be paid on Feb 21.

 

Revenue for the half-year period increased 15.2 per cent to S$682.2 million, from S$592.2 million in the previous corresponding period. Excluding transaction-based expenses, net revenue would have risen 15.6 per cent to S$646.4 million, from S$559 million in the year-ago period.

 

SGX attributed the increase in net profit and revenue to growth across all its business segments.

 

Loh Boon Chye, chief executive officer of the group, noted that the cash equities and equity derivatives segment led SGX&rsquo s broad-based performance.

 

Looking ahead, he expects some moderation of macro tailwinds in the near term. &ldquo We are focused on growing our business and remain optimistic about our medium-term outlook.&rdquo

SINGAPORE &ndash The Singapore Exchange (SGX) is eyeing new areas of growth and building partnerships with other bourses to generate more investment opportunities, said chief executive Loh Boon Chye. 

 

Mr Loh, who chairs the World Federation of Exchanges (WFE), a global association for exchanges and clearing houses, expects continued uncertainty in 2025, particularly with potential trade and policy changes under new US President Donald Trump. 

 

&ldquo In this highly dynamic environment, our role as a neutral and trusted marketplace where investors can manage risk and uncover opportunities has become even more important,&rdquo he said in an interview with the WFE.

 

Mr Loh noted that geopolitical risks, divergent monetary policies and modest global growth mean investors will hunt for yield in diversified assets and themes.

 

He cited emerging Asia as a bright spot that investors cannot afford to ignore, which is why the SGX is &ldquo building linkages and streamlining access to the region&rdquo .

 

The exchange is working on several projects to create new growth engines, including strengthening its distribution and membership network, and multi-asset offering across commodities, currencies, equities and fixed income.

 

Its strategy also entails developing products that simplify access to hard-to-reach markets, enhancing investment opportunities across borders and expanding product offerings with new depository receipts, exchange-traded funds (ETFs) and daily leverage certificates (DLCs) that align with global trends.  

 

An ETF tracks or replicates a specific index while a DLC gives investors a leveraged return based on the daily performance of an underlying reference instrument such as the Straits Times Index.

 

The SGX, which celebrates its 25th anniversary in 2025, is working closely with the Monetary Authority of Singapore Review Group to identify and develop initiatives to improve the equities market.

 

It also plans to leverage its leadership in bulk commodities and dry forward freight agreements to offer a single, capital-efficient platform

 

Mr Loh said new market participants such as buy-side firms, asset managers, hedge funds and commodity trade advisers are showing increasing interest in its FX futures as a way to hedge commodity trades. 

 

This creates opportunities to bridge the gap between currencies traded on the SGX and those traded outside centralised exchanges, he added.

 

Mr Loh is also looking forward to strengthening partnerships across the region to create a more connected and accessible marketplace for investors. 

 

Last August, SGX signed a memorandum of understanding with the Vietnam Stock Exchange that aims for greater cooperation, including exploring cross-listing opportunities between the two bourses.

 

The Singapore bourse has similar agreements with the exchanges in Indonesia and Thailand, among others, to explore collaboration opportunities.

 

Analysts have a positive view of the SGX in 2025.

 

Morningstar equity analyst Roy Van Keulen said SGX tends to shine amid market volatility because, unlike other bourses which have greater exposure to equities, the exchange here has an outsize derivatives market that allows traders to hedge their investments.

 

Derivatives traded volume rose 10 per cent year on year in December 2024 to 23.2 million contracts and was up 18 per cent in the full year to an all-time high of 298.4 million contracts.

 

RHB analyst Shekhar Jaiswal expects SGX to report a net profit of $323 million for the six months to Dec 31, 2024 &ndash a 14.7 per cent increase over the same period in the preceding year &ndash underpinned by securities and derivatives growth. The exchange is scheduled to unveil its earnings on Feb 6.

 

Mr Jaiswal, who has a $12.80 target price for SGX, expects the bourse&rsquo s first-half dividends to come in at 17.5 cents a share. The firm paid out 34.5 cents a share in the 2024 fiscal year, up from 32.5 cents a share in 2023.