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SGX Q3 earnings hit by limp share trading

SINGAPORE — It was another challenging quarter for Singapore’s securities market in the first three months of the year as investors continued to remain wary months after a penny stock crash last October rattled confidence, and amid general weakness in regional markets.

SINGAPORE — It was another challenging quarter for Singapore’s securities market in the first three months of the year as investors continued to remain wary months after a penny stock crash last October rattled confidence, and amid general weakness in regional markets.

Trading volume plunged 47 per cent to 169 billion shares between January and March, compared with 318 billion shares a year ago, the Singapore Exchange (SGX) said at its third-quarter earnings briefing yesterday. The total value of shares traded during the quarter was also down 35 per cent year-on-year to S$67 billion, said SGX.

Chief Financial Officer Chng Lay Chew said: “Trading activity in our securities market have been muted, further depressed by the designated stock event in October 2013.”

Mr Chng was referring to the incident that saw a combined S$8 billion in stock market value wiped out over three days after the share prices of Blumont, Asiasons and LionGold fell sharply in as-yet unexplained circumstances. An investigation by the Commercial Affairs Department (CAD) and Monetary Authority of Singapore (MAS) is still ongoing.

The penny stock crash was partially responsible for a 45 per cent drop in retail investor participation in the first three months, said Chief Executive Officer Magnus Bocker, adding that there is a general weakness in markets in the region as well, though the slowdown in Singapore is a little bit more significant.

“The most important I think is lower volatility. If you look at a year ago, we had (factors such as) Abenomics to drive volatility; there’s a lot of up and down so volume came through that. On top of that, there’s talk about assets going out of emerging markets into the US, Europe,” he said.

As a result of the weaker securities market, SGX saw its revenue for the quarter decline 13 per cent to S$166 million, while net profit fell 22 per cent to S$76 million. However, SGX is confident that activity in the securities market will recover over time, as steps have been taken to improve the quality and liquidity.

SGX implemented circuit breakers in February and will lower clearing fees from June. In addition, it has issued a joint consultation paper with the MAS that includes proposals for a minimum share price and collateral requirements for securities trading.

“What’s also encouraging is we’re seeing more retail investors in Singapore … that’s why we’re confident that the volume will come back,” Mr Bocker said.

However, Mr Roger Tan, CEO of Voyage Research, told TODAY that SGX may have to do more to restore liquidity in the Singapore market as there may be bigger factors behind the weak sentiment here.

“I think the (penny stock) incident simply added salt to the already-wounded confidence in the Singapore stock market. The value trade of the FTSE All-Share Index has been falling since 2008, but became worse in 2013 after the incident,” he said.

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