SGX profit jumps 24% in Q4 on robust derivatives showing

Singapore

THE Singapore Exchange's (SGX) move to woo retail investors by cutting board-lot sizes from 1,000 shares to 100 shares appears to be paying off, albeit in small steps.

Retail investors' trading in Straits Times Index (STI) stocks perked up 9 per cent to 45,330 in terms of the average number of retail investors per month in the first six months of the year over the preceding six months, said SGX.

This - coupled with the introduction of market makers and liquidity providers over a year ago, which contributed some 16 per cent of total traded value during fiscal year 2015 - is a sign that the exchange's securities market transformation is making progress, said SGX president Muthu- krishnan Ramaswami at a media briefing on the company's results.

"We have observed increased best depth value and narrower spreads for stocks quoted by these market participants. As a result, investors have been able to trade larger-size orders at the same or better prices in these stocks," he added.

However, challenges persist for the bourse's securities business whose revenue slipped 8 per cent in fiscal 2015 to S$209 million on the back of lower market activity and drop in average fee, whereas all its other businesses (chiefly derivatives) posted robust growth.

"We acknowledge the challenges in our securities business. Navigating the uncertainty in China as it unfolds while going ahead with new products and working with the broker community to make the market more attractive for investors is what we are focused on," said Mr Ramaswami.

For the final quarter ended June 2015, SGX turned in a 24 per cent jump in net profit to S$96.2 million, buoyed by its brightest spot: its derivatives business.

"Our derivatives business was the highlight of the year," said newly appointed SGX chief executive officer Loh Boon Chye.

For the quarter under review, revenue clicked 25 per cent higher to S$215.6 million.

Securities revenue was 4 per cent higher in the quarter at S$56 million while the derivatives business chalked up revenue of S$86 million, up 64 per cent from a year ago.

Earnings per share rose to 9 Singapore cents from 7.2 Singapore cents a year ago.

The board has proposed a final dividend of 16 Singapore cents payable on Oct 9, which represents an 86 per cent payout of the 2015 net profit.

For the full year, net profit rose nearly 9 per cent to S$348.6 million on the back of a 13 per cent increase in revenue to S$778.9 million.

Excluding the revenue from Energy Market Company Pte Ltd - SGX completed the acquisition of EMC in October 2014, making it a wholly owned subsidiary - revenue increased 11 per cent.

Operating expenses saw an uptick of 25 per cent to S$105 million for the quarter and 20 per cent for the full fiscal year primarily due to increased staff, technology, and processing and royalty expenses.

Securities daily average traded value (SDAV) and total traded value both fell 4 per cent to S$1.09 billion and S$274 billion for the full year primarily due to lower volatility.

Revenue from the derivatives business, largely led by equities and commodities revenue, jumped 42 per cent for the full year to S$296 million. The derivatives and securities business accounted for 38 per cent and 27 per cent respectively of group revenue.

Volumes in the derivatives space were driven by the strong performance of the China A50 and iron ore contracts whose volumes rose more than three-fold over the year.

SGX shares closed 16 Singapore cents or nearly 2 per cent higher at S$8.23 on Wednesday.

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