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Tough year for SGX, but bourse sees turnaround

SINGAPORE — The past 12 months proved challenging for the Singapore Exchange (SGX), as its core securities business dwindled, but the bourse said the segment should turn around after it took steps to boost trading and investing activities.

SINGAPORE — The past 12 months proved challenging for the Singapore Exchange (SGX), as its core securities business dwindled, but the bourse said the segment should turn around after it took steps to boost trading and investing activities.

Total trading volume for the year ended June 30 fell 9 per cent to 687 billion shares from 752 billion shares a year earlier, the SGX said in an aftermarket announcement yesterday. Total traded value took a larger hit, plunging 22 per cent to about S$286 billion from S$369 billion, it said.

“We have had a tough year,” SGX chief executive Magnus Bocker said, attributing the muted activity partly to record low market volatility, which meant less room for traders to benefit from price movements. The 30-day historical volatility of the FTSE Straits Times All Shares Index plunged to 5 per cent at the end of June from 16 per cent one year ago.

“In the past three quarters, we have also seen an outflow of funds from Asia, which affected the daily average trading value,” Mr Bocker added. “And since October last year, we have noticed a decline in short-term speculative activity, especially on the lower-value stocks,” he said. He was referring to the penny stock rout that resulted in a combined S$8 billion being wiped out of the market value of three stocks — Blumont, Asiasons and LionGold — in three days. The sell-off prompted the SGX to suspend trading in these counters and then listing them as “designated stocks” subjected to various restrictions.

The weakness in the securities business resulted in operating revenue for the segment falling 17.5 per cent to S$226.9 million for the year ended June 30.

But this was partially offset by gains in the other business segments within SGX, which resulted in a 4 per cent decline in full-year operating revenue to S$686.9 million, the SGX said. Net profit for the year fell 4.6 per cent to S$320.4 million.

For the fourth quarter, operating revenue plunged 14.7 per cent to S$172.6 million, with net profit falling 11.6 per cent to S$77.4 million.

The exchange said it had taken several initiatives to strengthen the securities market, which it hoped will lead to a recovery in the segment that remained the largest revenue contributor despite the weakness seen in the past year.

These steps include the implementation of circuit breakers last February as an additional market safeguard and the introduction of new order types to improve trade execution.

It also issued a joint consultation paper with the Monetary Authority of Singapore with proposals such as a minimum share price and share collateral requirements to further enhance the market. And last month, SGX opened itself to big market makers in a move to boost liquidity.

Mr Bocker said: “It was a year during which we accelerated the transformation of our securities market to improve governance and securities. We expect our securities business to recover from a tough financial year as volatility normalises from the lows we had experienced in the past year.”

He added that the exchange continued to be on the lookout to grow its business, and is set to launch electricity and gold futures in the next few quarters, as well as expand its FX futures contracts.

“Despite the tough year for the securities market, this shows that we are still able to grow our business in all other segments,” he said.

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