Singapore Exchange (SGX)

[Temperament]

Ok. If u notice those companies with a sustainable economic moat n which have been ard for the past 20-30yrs, the average yield of one such company is often ard a certain %. Some 2-3%, some 3-4%. Sure, good yrs it goes up a bit n vice cersa for poor yrs. Personally i am keen on a 3-5%yield at time of entry. But tt alone is not not enough. More impt to u is tt no skipped payments n ability to raise div over time cos those characteristics say a K of words on the company.

" Some 2-3%, some 3-4%. Sure, good yrs it goes up a bit n vice cersa for poor yrs."
Unquote:-
i think by now i understand fully by what you mean by dividends throughout the years. It's O. K.
as long as you are happy with the result.

[weijian]

If you don't mind sharing, do you think SGX can continue to grow its profits at reasonable levels in the current decade ?
(Not Vested)

Let me give my 2cts worth on this question.

First and foremost, SGX is a company exposed to the financial sector of the economy. It has similar characteristics with other financial stocks like banks - ie. it's long term growth trajectory most probably tends to track that of the local+world economy. Because of its unleveraged nature and smaller exposure to credit, it does suffer less boom/bust than other financial stocks like banks.

Although SGX has no competition locally, it should be noted that it is not written in rule that a 2nd exchange cannot setup shop by applying to MAS for a license. So technically, a 2nd competitor can set up shop locally although it remains to be seen whether it is profitable enough for anyone to want to do so. So the competition for SGX is GLOBAL in nature. The worldwide exchange business is immensely competitive for IPOs and derivative trading. Been an operator in a small country, it will not be able to attract the truly big boys (eg. Alibaba lists U.S as an alternative listing avenue than HKEX, while Prada, an italian company listed itself on HKEX). The last big catch by SGX was HPT, and not alot of investors have fond memories to date. A recent potential big catch would be F1, but it does not bode well that Bernie has delayed the listing for some time already.

That said, on the global front, SGX is now targeting to be the Asian clearing house of choice and supermarket for asian derivatives. On the local front, it targets to increase retail participation. In the aftermath of GFC2008, one initiative was that all derivatives trading must be cleared by a counterparty and SGX is working to position itself with technology upgrades, getting qualified under Basel III and pumping up capital for SGX-DC etc etc. In retail participation, small moves like setting up trading competitions and working with academic institutions to increase investment knowledge has been made. There remains bigger efforts like strengthening the regulatory structure/enforcement or reducing minimum lot size that are in the pipeline.

In summary, I would say Magnus Bocker has positioned the company's objectives correctly and execution would now be the key, to answering whether 'SGX can continue to grow its profits at reasonable levels in the current decade'.
As i do not wish to risk to look stupid in the future by making a firm stand here, i would just end with a probabilistic motherhood statement : As of current - the initiatives look good and all indicators are pointing to a growing derivative and clearing business although the recent penny stock saga seems to have blown a hole in the increasing retail participation statistics. How it executes its various plans in the pipeline and continuing to build trust (well, alot of people who kenna burnt from s-chips would twitch an eye) between regulators and customers would be key.

(vested)

*Side note: Mr Bocker's hairline was visibily receded and he is also getting thinner compared to 3 years ago when he took up the job. Is that an indication of how stressful and demanding the job is?

[CityFarmer]

SGX plans steel derivatives, to take on China rebar

SINGAPORE - The Singapore Exchange (SGX) plans to launch steel futures and swap contracts early next year, hoping to cash in on rising consumption of the alloy in Southeast Asia.

SGX is trying to open up the Asian steel derivatives market by taking on rebar futures in Shanghai, currently the world’s most liquid steel futures but which are not open to foreign investors unless they are registered locally.

The SGX contracts would add more steel derivatives to a largely illiquid global suite outside China, and their success would depend on whether traders from the world’s biggest steel consumer and producer use them or not.
...
http://www.todayonline.com/business/sgx-...hina-rebar

[specuvestor]

Hmm..put it another way. If u own a share which costed u $1 a decade ago which pays u a yield of 4c, wldn't u be delighted to own it if it has gone up to $10 today and pays a similar yield % which amounts to 40c today?
If not, wat r ur thoughts?

I would just use 'yield' based on current market valuation and compare it with other prospective investment yields to decide if it remains to be the best value there is available.

Original Investment: $1.00
Dividend: $0.04
Yield: 4%

Current Investment: $10.00
Dividend: $0.40
Current Yield: 4%
Yield on Cost: 40%

If we keep using yield on cost as a yardstick, few (if any) investment opportunity will surpass it. But what you paid for is history. What matters is what you can get today. If there is a similar Company (maybe HKEX) going for 5% yield, one might say using yield on cost, the current investment is better ie why sell something yielding 40% on cost for a 5% yielding instrument. But the reality is much different:

New Investment: $10
Yield: 5%
Dividend: $0.50

You actually get more cash-flow switching. This is very trivial example and investing is generally far more complicated - no 2 investments is alike !

With that being said, I do agree with the idea of compounding returns from growing dividends. It is difficult to lose money from such a strategy IF you can find a company that is able to grow its profits consistently and purchasing its equity at a reasonable valuation.

If you don't mind sharing, do you think SGX can continue to grow its profits at reasonable levels in the current decade ?

(Not Vested)

Hi nick, i agree wif ur point tt if we use yield now at cost price as yardstick, few other investments will surpass it. Taking the case of sgx, its past 10yr cagr is ard 16-18%. I am not vested in this. But if i were, taking my focused investm style, i think i will sit tight for the next 10yrs as the likelihood of this performance repeating is high.
Imo, investment can be as complex in analogy to a patient receiving medicine for flu. He could question that panadol prescribed might not be good for his liver or that flu tablet might cause too much drowsiness. Each medine has at least 5-10 side effects. The alternative less stressful way is to just take the medicine and rest and get well.
Haha. To me, i don't know much about accounting and i only bother about protecting and growing my money. I am not saying that knowing a lot is bad. But to me, i look at the company, its core parameters and ask myself whether i think this company which has been ard for the past 20-30yrs, will it be around for the next decade or so.

IMHO both approaches are good but Gautam uses a very long term approach, which will require you to have an understanding of the business and MOS for next 10 years, not unlike Buffett. Dividend yield is a great indicator as it is cashflow to the shareholders, not just funny money. Additional considerations are capacity to pay ie pay out ratio and cash hoard. And of cause the usual business moat considerations.

IMHO SGX execution sucks on developing new products, but the business environment and model is good for stable sustainable albeit pedestrian growth.

[gautam]

thanks specuvestor n nick.
additional point in going long n not switching for a higher yield is that after nearly a decade of investing, my stakes are huge, well into 7 digit range. sometimes hard to switch positions esp illiquid counters. mistakes in switching are truly unthinkable for me. so i rather sit tight and enjoy adding wealth quietly, is better way for me to pass time. but yes, i do use my dividends to enter another well researched counter once the stake in my previous counter exceeds my comfort level.
gautam

[CityFarmer]

Will the SGX service be used, instead of local clearing house for US customers?

SGX approved for US derivatives clearing

SINGAPORE — The Singapore Exchange has become the first Asian exchange to be allowed to offer clearing of over-the-counter (OTC) derivatives to American customers after winning United States regulatory authorisation.

Under Washington’s Dodd-Frank Act, the Commodity Futures Trading Commission requires all clearing houses that clear derivatives swaps for US customers to be registered with the regulator.

The approval means the SGX can now offer its clearing services for products including iron ore swaps, interest rate swaps and non-deliverable foreign exchange forwards to US banks, asset managers and other US financial institutions in compliance with the latest US laws and regulations, including the Dodd-Frank Act, the Commodity Exchange Act and CFTC’s regulations.
...
http://www.todayonline.com/business/sgx-...s-clearing

[CityFarmer]

Win-win for SGX, more brokers, more transactions and more profit...

SGX partners e2i to draw more to stockbroking

SINGAPORE – The Singapore Exchange (SGX) is partnering the labour movement’s Employment and Employability Institute (e2i) to draw more Singaporeans to the stockbroking profession and equip newcomers with the necessary skills.

A joint statement on Friday said the two sides will work closely with stockbroking firms to identify potential candidates to join the profession.

The partnership is targeting 50 candidates in the pilot run.

The candidates will enrol in training programmes at the SGX Academy, and receive help with job placements.

The statement said more than 30,000 individuals attended SGX Academy’s 350 programmes last year, including those for licensed brokers.
...
http://www.todayonline.com/business/sgx-...ockbroking

[pianist]

what exactly does a stock broker do? are they trading on behalf of sgx?

[felixleong]

what exactly does a stock broker do? are they trading on behalf of sgx?

Close to 2000 post and u still dunno? Sorry that i am rude, u have been around so long and yet i notice u always ask simple questions that can be googled... U also rarely contribute much. U just often have this habit of spamming short questions... Stop treating us as your answering machine zzzz

[Greenrookie]

Win-win for SGX, more brokers, more transactions and more profit...

SGX partners e2i to draw more to stockbroking

SINGAPORE – The Singapore Exchange (SGX) is partnering the labour movement’s Employment and Employability Institute (e2i) to draw more Singaporeans to the stockbroking profession and equip newcomers with the necessary skills.

A joint statement on Friday said the two sides will work closely with stockbroking firms to identify potential candidates to join the profession.

The partnership is targeting 50 candidates in the pilot run.

The candidates will enrol in training programmes at the SGX Academy, and receive help with job placements.

The statement said more than 30,000 individuals attended SGX Academy’s 350 programmes last year, including those for licensed brokers.
...
http://www.todayonline.com/business/sgx-...ockbroking

I am not sure if the increase of brokers will increase the pie of investing/trading. Although penetration rate of Singaporean retail investor is low, I am not sure if having more stockbrokers is the way to increase it, and hence SGX revenue.

The super profits years of SGX is when they roll out the red carpet for s-chips and which also coincide with the bull years.

When bull years come, trading will increase, but I am not sure if they can repeat the stunt of attracting whatever chips to Singapore. I am also not sure about the derivatives business, and if they have to bear the counter-party risk or if the brokers have the bear the risk? If it is the brokerages, at least SGX is actively pursing new revenues of growth.

There is an article in the edge btw