Singapore bourse hopes Southeast Asia will copy HK-Shanghai stock link

[SINGAPORE] Singapore Exchange Ltd's chief executive said on Wednesday he is looking to emulate the much-heralded Stock Connect link between Hong Kong and Shanghai by formally linking together Southeast Asian bourses.

With a plan already in the works to form a stock trading link with Taiwan later this year, Magnus Bocker told Reuters that establishing direct connections between exchanges has replaced mergers and acquisitions as the industry's main growth strategy, particularly in Asia.

He wants a fledgling link between stock broking houses in Singapore, Malaysia and Thailand, known as the Association of Southeast Asian Nations (Asean) Trading Link, to evolve into a formal connection between the region's exchanges.

"I'm optimistic that out of that Asean Trading Link, with what's going on in linking up markets, that hopefully within a couple of years we can link Asean closer together between the exchanges, the clearing houses," he said.

The November launch of the landmark Stock Connect trading platform between Hong Kong and Shanghai has, despite some technical problems, been hailed as a major step forward in the opening up of China's capital markets.

The launch has spurred other exchanges including Taiwan and Shenzhen to look at such connections, hoping to make cross-border share trading easier and improve market liquidity.

Developing such a link in Southeast Asia will be tough though. Asean is notorious for its slow progress on joint initiatives, and the current trading link between broking houses that was established in 2012 has so far seen low volumes.

"We are not there yet but with the other links coming, I think it will enable us to do it in an Asean context," Mr Bocker said.

Joining Stock Connect or forming a strong separate Asean trading link would provide an impetus to Singapore's beleaguered securities market.

While Singapore is the number one venue in Asia for foreign exchange and has seen strong growth in derivatives trading, the average value of shares traded on its exchange each day is now less than that of Thailand's and trails far behind Hong Kong and Tokyo.

The bourse has launched a series of initiatives over the past year to boost liquidity such as providing incentives for brokers to act as market makers and cutting the minimum number of shares that need to be purchased in a trade from 1000 units to 100.

Mr Bocker says while it is still early days, initial signs are that those moves are now starting to boost volumes, which were hit by a penny stock scandal in late 2013.

"The first three weeks of this year are coming up much stronger than the same three weeks a year ago," he said.

Speculation mounted late last year that Mr Bocker, 53, may not have his contract renewed when it expires this June, after two technical glitches in less than a month caused stock trading to be halted.

He says his contract renewal is a matter for SGX's board.

"I am enjoying what I am doing. There is no doubt about it."

Investors say while Mr Bocker is taking the right steps, until it can attract bigger companies to list on its market, it is likely to remain in the shadow of Hong Kong Exchanges and Clearing.

"It doesn't have the big brother hinterland that Hong Kong has. So that's a structural issue for them," said David Smith, head of corporate governance at Aberdeen Asset Management Asia, which owns shares in SGX.

Unlike Hong Kong, Singapore has seen few large IPOs in the past two years while there has also been a spate of delistings among its bigger companies. Last week, conglomerate Keppel Corp offered to take private its property unit in a US$2.7 billion deal.

Mr Bocker says while the exchange struggles compared with Hong Kong to attract large Chinese state-owned companies on to its market, they still have a strong pipeline of companies from India and other Asian markets looking to list.

"The rumour of our death is a little bit exaggerated, I would say," he said.

REUTERS