It’s not often that you encounter a company that offers a mix of growth and dividends .
Especially during a pandemic that has depressed Singapore’s growth to its lowest since independence.
Singapore Exchange Limited, or SGX, is one such company, plus it is also part of the Straits Times Index’s 30 components.
The company’s inclusion in the index means that it is considered to be a blue-chip company .
SGX has the advantage of being a digitally-led business that owns and operates an online platform for the buying and selling of securities.
Hence, the business has emerged relatively unscathed during this crisis, as its services are deemed to be “essential”.
For the fiscal year ended June 30, 2020, SGX reported a sparkling set of earnings.
Revenue increased by 16 per cent year on year to $1.05 billion, while net profit after tax jumped by 21 per cent year on year to $472 million.
A final quarterly dividend of $0.08 was declared, bringing the full-year dividend to $0.305.
Here are three reasons why I believe SGX can continue to perform well.
Digital shift
The pandemic has forced many people to adopt work or study from home habits.
This digitalisation shift, which was already taking place before the pandemic, was suddenly accelerated as the virus swept across the world.
As market volatility increased, many investors started opening new investment accounts to take advantage of attractive valuations for stocks.
Total securities trading volume and value have been healthy and rising.
For July, securities market turnover rose 5 per cent year on year to $25.5 billion, while daily average value increased by 15 per cent year on year to $1.2 billion.
Exchange-traded funds (ETFs) saw turnover more than double year on year to $444 million as more institutional and retail investors deployed their capital.
Assets under management of SGX-listed ETFs grew 20 per cent to $6 billion, demonstrating the strong influx of cash onto SGX’s trading platforms.
This shift looks set to stay and should continue to boost SGX’s trading volumes and bring in higher levels of revenue.
A replacement suite of derivatives
SGX’s Big Shake‑up: From 2021 to 2026, Who’s Got the Future?
Late May, the Singapore Exchange (SGX) dropped a bombshell: the license that lets MSCI Singapore futures and options run the show will expire in February 2021. But fear not—both sides are plotting a sequel. Here’s what’s cooking under the hood.
1⃣ The 2021 Profit Pinch
- Impact forecast: SGX says the die‑hard hits will shave 10–15 % off the FY 2021 net profit after tax—before any magic tricks.
- Why it matters: The estate of MSCI futures will vanish, forcing SGX to fill the gap fast.
2⃣ SGX’s “New Kids on the Block” Strategy
To keep the ticker lights bright, SGX has been hustling out a slew of fresh securities. The rollout is as quick as a coffee order.
June – “Single Stock Frenzy”
- 10 fresh single‑stock futures launch on June 15.
- Every trader can own a slice of the company pie.
July – “Taiwan’s All‑Day Buffet”
- Launch of an FTSE Taiwan RIC Capped Index future on July 20.
- Cool factor: 24‑hour access to big‑and‑mid‑cap Taiwanese stocks.
- First week sales > US$1.5 billion (S$2.1 billion), open interest > US$191 million.
- More than 50 players across 17 clearing houses.
August – “REITs, Meet Your Superstars”
- Presenter’s presentation: Asia’s inaugural international REIT futures.
- Two brand‑new contracts, launched on Aug 24:
- SGX FTSE EPRA Nareit Asia ex‑Japan Index Futures.
- SGX iEdge S‑REIT Leaders Index Futures.
August/September – “All‑Asia, All‑GDP”
- 13 new futures contracts bring you right into the heart of almost 100 % of Asia’s GDP.
- Talking big: covering every major market in the region.
3⃣ Why It All Matters
- Volume is king: More product = more trading.
- Clients, rejoice: New tools attract the broadest base of investors.
- Future‑proofing: SGX is sharpening its edge of innovation, refusing to get left behind.
Bottom line: SGX is conducting a massive makeover, turning an impending license expiry into a launchpad for future growth. If chasing trading volume feels exciting, you’re in the right place.
Astute acquisitions
Finally, SGX has also been active on the acquisitions front.
In January this year, it announced the acquisition of Scientific Beta for EUR 186 million.
This acquisition will strengthen SGX’s index business and allow it to broaden the range of index products and clientele.
In June, SGX moved to fully acquire BidFX, which it used to own just a 20 per cent stake.
The remaining 80 per cent was acquired for around US$128 million and will establish SGX as a one-stop venue for international forex OTC and futures participants.
SGX has set clear goals on what it wishes to achieve over the long-term and is working hard on many fronts to grow the business.
CEO Loh has done an admirable job in transforming the group from a mere stock exchange to a pan-Asian, multi-asset exchange.
I believe the best is yet to come for the bourse operator, as the many catalysts mentioned above played out over time.
This article was first published in The Smart Investor. Disclaimer: Royston Yang owns shares in Singapore Exchange Limited.
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