Under the proposed arrangement initiated by the Monetary Authority of Singapore (MAS) and the Securities Commission Malaysia (SC), investors can trade and settle shares listed on each other’s stock market in a more convenient and cost efficient manner.
“We view this as a positive development and expect synergies to come through in this government-to-government initiative,” says analyst Ng Li Hiang in a Thursday report.
Meanwhile, investors are keeping a close watch on developments with SGX India equity derivatives.
This comes after escalating tensions threaten to kill off an 18-year licensing partnership between SGX and the National Stock Exchange of India.
Shares in SGX took a tumble after stock exchanges in India announced they intend to restrict the usage of Indian indices and market data by foreign exchanges, indices and data providers.
This sparked concerns that the move would prevent SGX from continuing to offer derivatives based on India’s benchmark Nifty 50.
“On SGX India equity derivatives, [SGX] is working with NSE to develop a link in GIFT City; and to list successor products soon (which require regulators’ approvals),” says Ng. “[SGX] plans to engage market participants to roll into these successor products from the current SGX Nifty suite of products.”
According to Ng, the Singapore bourse is also looking to diversify revenues by focusing on foreign exchange and fixed income for further growth.
“SGX is also open to inorganic opportunities, such as trading platforms that can complement its FX/fixed income business. It has the ability to leverage given its healthy balance sheet with zero debt,” the analyst says.
See also: SGX inks MoU with New Zealand Stock Exchange to cooperate in Asia Pacific markets
In addition, SGX wants to attract more technology companies to list on the bourse.
“It looks to target start-ups over the next few years and is positive that the collaboration with Nasdaq can facilitate cross-listing of technology companies on both exchanges. On dual class shares, it intends to target listings of companies that are between $1-5 billion,” Ng says.
In the 2Q18 ended December, SGX's quarterly earnings came in flat at $88.4 million, even as revenue edged up by 3% to $205 million.
“We believe SGX is a good proxy for the market cycle, with healthy FY18-19 ROEs of approximately 35% and yields of approximately 4%,” says Ng.
As at 11.11am, shares of SGX are trading 6 cents higher at $7.50, or 21.5 times FY18 earnings.
