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SGX eyes smaller deals as bourse mergers implode
[SINGAPORE] As global bourses come to terms with the failure of the latest mega-merger, Singapore Exchange (SGX) is sticking to its incremental approach.
SGX, which tried to buy ASX Ltd in a deal rejected by the Australian government in 2011, still wants to strike deals, though another blockbuster expedition is unlikely. Instead, it's eyeing potential acquisitions in financial technology as well as of firms that complement existing capabilities, according to its recently appointed equities head.
"It is very difficult to persuade another exchange that you want to buy them and then take up lots of costs, precisely because these are national infrastructures," Michael Syn, who oversees both the stock and futures markets as head of equities, said in a recent interview. "That is very hard to do in very regulated marketplaces."
The softly-softly strategy may make it hard for SGX to catch up with other Asia-Pacific players, especially Hong Kong Exchanges & Clearing Ltd, which has a market capitalization about six times larger than its Singapore rival. However, HKEX has lost a chance to jump even further ahead with its decision last week to abandon a £29.6 billion (S$51.3 billion) takeover bid for London Stock Exchange Group Plc.
Recent SGX deals have included investment in companies such as BidFX and 1exchange, a platform that uses blockchain technology to record trades of private securities.
As well as scouting for suitable acquisitions, Mr Syn said SGX is working on a number of projects that play to its strengths as a stable, higher-yielding market at a time of weakening global economic growth.
Mr Syn said he views delistings and the lack of big initial public offerings in Singapore as part of the natural market cycle, though both these factors have been seen as constraining the growth of the equity market. Just this month, Southeast Asia's biggest property portal PropertyGuru kick-started plans to list on the Australian stock exchange, more than 10 years after being founded in Singapore.
An IPO "is not a hunting exercise," said Mr Syn. Most of the process is driven by the issuer and the bankers, so the job of the exchange "is to make sure that your platform is ready, that you have the right to play and the right to win when someone comes along." He sees secondary fundraisings continuing to make up most of what SGX offers in terms of new capital formation in the next two years.
So far this year, SGX shares have gained more than 17 per cent compared to the 1.4 per cent gain in the city-state's benchmark index and HKEX's 4.7 per cent rise.
Here are the initiatives Mr Syn, who took on the equities role in June after leading the bourse's derivatives business, is looking at:
Launching more single-stock futures, starting with Singapore shares. Though SGX hasn't announced a date, Mr Syn said the launch horizon for such products is typically a year or less. The SGX already offers single-stock futures on Indian equities
Introducing derivatives on freight capacity, meeting demand from ship owners; SGX is also looking at products that allow for the purchase of container freight places, rather like booking a hotel or a flight on Expedia
Setting up systems that allow retail clients to trade via social media applications such as Facebook Inc.'s WhatsApp or Tencent Holdings' WeChat
One area where it has put on the brakes is cryptocurrency, Mr Syn said. SGX had looked at offering physical Bitcoin futures, along the lines of Intercontinental Exchange Inc's Bakkt unit. But after studying the technology, SGX couldn't overcome concerns about becoming a Bitcoin custodian.
"We figured we could make it reasonably hackproof, but there would be contagion on the reputation if there's a breach, regardless of insuring away the financial loss," Mr Syn said.