Singapore Exchange (SGX)

[cyclone]

SGX scales up its index business with EUR186 million acquisition of smart beta index firm, Scientific Beta
* Strategic investment will strengthen SGX’s research-based index design capabilities as well as broaden the range of index products and clientele
* US$55 billion in assets owned by global institutions track Scientific Beta’s indices; this has risen more than 10 times in four years, on the back of significant growth in factor investing

Singapore Exchange (SGX) is scaling up and accelerating the growth of its Data, Connectivity and Indices (DCI) business with the acquisition of a 93% stake in Scientific Beta Pte. Ltd. (Scientific Beta) for EUR186 million in cash (S$280 million), subject to closing adjustments.

Established by EDHEC-Risk Institute (ERI Asia), an affiliate of EDHEC Business School, Scientific Beta is an independent index provider specialising in smart beta strategies, with expertise in factor-based and risk-managed solutions. Headquartered in Singapore with offices in France, UK and US, the company provides investable smart beta indices to its clients, drawing on the expertise of ERI Asia in portfolio construction and risk allocation.

Over 60 asset owners and asset managers use Scientific Beta’s indices to track or benchmark their smart beta investments. As at 30 September 2019, there were US$54.7 billion in assets replicating Scientific Beta’s indices, growing more than 10 times in just under four years. 30% of these assets under replication were integrating ESG dimensions.

More details in :
1. https://links.sgx.com/FileOpen/20200123_...eID=594339
2. https://links.sgx.com/FileOpen/20200123%...eID=594340

[weijian]

The derivative business is definitely a great way to punch above your weight. But regulatory risks like what happened to the Indian Niffy contracts situation cannot be ruled out.

Betting on SGX? Better metrics than many listed gaming peers

SIR, would you like to make a wager - or hedge, as professional investors like to call it - on Singapore?

That may be quite a bet to make. Singapore's equity market and economy are a tad too small, with growth maturing.

Not to worry, sir! We can offer you China, India, Japan, Indonesia, Taiwan, the US dollar, Chinese yuan, Indian rupee and much more. If that still does not cater to your tastes, we can extend to you more exotic offerings: iron ore, coal, shipping freight, petrochemicals and rubber. You need not be bullish, you can even be bearish. You can participate in this suite of products at the convenience of a single deposit - or margin. So, come on in and place your... hedge.

https://www.businesstimes.com.sg/compani...ming-peers

Noticed SGX's business is probably 1 of the more resilient in current market conditions. The securities and derivatives business has been hitting much higher volumes and the former, which has greater margins, have almost doubled in the last 1 month.

SGX's business strives when there is volatility. From an asset allocation perspective, it is similar to a long-VIX type of hedging, exception that it doesn't reduces over time like the VIX.

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24 Apr 2020 SGX 3QFY2020 everything up except dividend
1. Revenue up 29% from a year earlier
2. NP up 38%
3. EPS up 38%
4. Div same 7.5 cents
5. Expansion to US/EU outside of Asia trading hours, grown to 20% of derivative volumes
6. Continue Quarterly dividend despite adopting half yearly report.

Loh Boon Chye, Chief Executive Officer of SGX, said, “Amid the COVID-19 pandemic, our priority is to keep SGX’s markets relevant, resilient and fully accessible round-the-clock, to serve the heightened demand from market participants for risk management solutions and investment opportunities across our asset classes."

Stay home and stay healthy, everyone.

[weijian]

24 Apr 2020 SGX 3QFY2020 everything up except dividend

A little while ago (FY19), SGX's dividend policy used to be 20cents/share or 80% of NP. From FY19 onwards, the "% of NP" was taken away and dividend policy became 30cents/year (or 7.5cents/quarter).

The dividends paid out in the last few years fluctuates at around ~80-90% of NP. In a bad year like 2011/2012 (spent too much money on SGX-ASX failed merger), dividends remained the same as prior year and payout ratio hit close to 100% of NP.

SGX dividends have been consistent (abeit slow increase) on a yearly basis since GFC2008. 3Q20 result is an anomaly and probably wouldn't be repeated. Whether is it the dividend policy or past behavior, there is actually little indication that a quarterly dividend increase would actually materialize.

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27 May 2020 SGX halted

(click for sgx announcement)

SGX reduce MSCI license agreement from Feb 2021.
MCSI Singapore futures and options remain listed, license agreement for all other MSCI products will expire in Feb 2021.

“We will work closely with the relevant stakeholders in managing their open interest as we gradually discontinue our MSCI equity index futures and options contracts, except for MSCI Singapore, next year. 
While this may have a near-term impact on our equities derivatives open interest, our multi-asset portfolio shelf has reached a critical mass.”

SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN and offers commodities and currency derivatives products.
(click for details)

Stay home and stay safe, valuebuddies.
Ackman on Short Selling

[weijian]

27 May 2020 SGX halted

(click for sgx announcement)

SGX reduce MSCI license agreement from Feb 2021.
MCSI Singapore futures and options remain listed, license agreement for all other MSCI products will expire in Feb 2021.

If we were to use the first 10months (FYTD 2020) of the derivatives volume based on April 2020, the MSCI indices probably takes up ~25mil (16%) for non-Spore and ~10mil (6%) for Spore. For the non-Spore volume, the majority of them is coming from 1 country, Taiwan (~20mil). So in a sense, after taking away Spore/Taiwan, MSCI stuff had never reached critical mass and it is actually minuscule. (p.s all these are quick back of envelope calculations for approximation purposes)

SGX April 2020 derivative report: https://api2.sgx.com/sites/default/files...202020.pdf

Nonetheless, the removal of all MSCI indexes (except Spore) is probably a similar hit like the Niffy contract saga 2-3 years back. It is a brave new world that SGX is venturing into - by removing the support from MSCI and probably trying to fill the gap with SGX Edge.

Coincidentally, MSCI isn't too sad as they have a new bigger partner.
https://www.hkex.com.hk/News/News-Releas...sc_lang=en

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27 May 2020 SGX hit by loss of most MSCI contracts to HKEx

SGX lifted halt during lunch break. (sgx lifted halt)


Immediately, the stock drop $1 or about 12%, the most since 2003.
After ending the 23 years relationship with MSCI, SGX profit could fall by 10 - 15%.
In parallel, HKSE announced launching of 37 MSCI futures and options contracts as part of 10 years licensing agreement.
(click to read article)

Stay home and stay safe, valuebuddies.
Joel Greenblatt judge contest:

[weijian]

Actually, 80% of the non Spore MSCI contracts is the MSCI Taiwan. I cannot imagine HKEX actually has anything to do with Taiwan.

Nonetheless, the 10-15% overall profit drop (security, derivative and data etc) when it is 10-15% volume lost from only derivative portion, does suggest these MSCI contracts have much higher margin compared to the other derivative products.

2 years ago, there was an issue between NSE and SGX on the Niffy contract and it was resolved pretty competently by the Mgt. Would be interesting to observe the potential mitigation measures rolled out and how SGX handles this, FTSE Taiwan?

[helllo]

Excellent analysis on the derivative contracts, though i suspect the profit fall has more to do with the inflexibility of G&A rather than a higher profit margin on derivative contracts. Hopefully they can find an alternative license.

Personally struggle to see political motivations being strong enough for HKEX to forgo Taiwan with a risk of 80% fall in volumes of HKEX's newly secured contract.

[¯|_(ツ)_/¯]

11 June 2020 partnering with Ucommune
https://links.sgx.com/FileOpen/20200611_...eID=617487

"Singapore Exchange (SGX) is partnering with Ucommune, China’s largest co-working community operator, to share its fundraising knowledge and  nsights with the community’s global members. The strategic partnership will allow SGX to support Ucommune’s members in understanding  quity and debt capital raising as well as tapping international funding via Singapore’s capital markets."

Stay home and stay safe, valuebuddies.