Singapore Exchange pushes into Asian bond trading as IPOs sink

[SINGAPORE] Singapore Exchange is seeking to capture a larger slice of secondary trading of foreign-currency bonds from Asian issuers to augment revenue as it endures a multi-year slump in initial public offerings.

The bourse is recruiting more participants to its bond trading venue since its launch in December, Tsai Li Renn, head of fixed-income trading, said in an interview. There are about US$10.8 trillion worth of notes outstanding denominated in the US dollar, euro and yen issued by companies and governments in the Asia-Pacific region, according to Bloomberg data.

"The Asian bond market will continue to grow because of the underlying investor demand and we look at the market infrastructure to support that growth," Mr Tsai said. "We believe we can reconnect the fragmented liquidity fields, especially post-the global financial crisis."

Efforts to broaden its revenue base are among more pressing challenges for the bourse after losing its spot as the top destination for IPOs in Southeast Asia. Since former banker Loh Boon Chye took up the chief executive post in July, the exchange operator has unveiled index services, offered more commodity and currency derivatives and widened access for corporate bonds to retail investors.

SGX's internal survey suggests some 55 to 60 per cent of Asian G3-currency bonds are transacted during Asian trading hours, Tsai said. Future plans include dedicating more resources to access more trades in Asian notes during European and US time zones, he added. He declined to identify the institutions SGX is talking to after six parties signed up in December.

Companies that listed last year in Singapore raised US$366 million, according to data compiled by Bloomberg, the lowest amount since 2001. That was the smallest haul among Southeast Asia's four biggest stock markets. SGX's revenue grew 3 per cent to S$205.8 million in the quarter to March 31 while earnings rose 1 per cent to S$89 million, SGX said last month.

"From the SGX perspective, this is a long-term plan to develop fixed income as another asset class that can contribute to the revenue and bottom line," Mr Tsai said. "We would be more patient than anything else in developing this market." Bloomberg LP, the parent of Bloomberg News, runs an off- exchange trading system called Tradebook and owns a stake in Bids Trading LP, which operates a dark pool.

BLOOMBERG