Singapore Exchange (SGX)

[arriyana]

Why do you think the electricity futures will be hot in Singapore? Given that the volatility of electricity is fairly low in Singapore and there is no private house to stimulate electricity futures demand, I am not confident of the product.

The futures will be as popular as hot cake, IMO.

I have vested in SGX, when it share fall below $6.8 recently.

(vested)

SGX plans to launch first electricity futures in Asia

The Singapore Exchange (SGX) is planning to launch the first electricity futures in Asia to provide a means for market participants in the Singapore electricity market to manage their risk exposures.

It is starting a public consultation on the proposed introduction of SGX Uniform Singapore Energy Price (Usep) quarterly base load electricity futures.

The futrues will be traded on its derivatives trading platform and cleared on its clearing house.

The contract will be a standard, cash-settled futures contract listed on a quarterly basis: January to March, April to June, July to September, and October to December.

http://www.theedgesingapore.com/the-dail...-asia.html#

[CityFarmer]

Like most things in life, "Begin with the end in Mind". We should always starts with a story, before any investment.

For me, SGX is a stalwart, base on Peter Lynch terminology. Stalwarts are stocks that generally buy for a desired gain, then sell and repeat the process with similar stories.

(vested)

Very true! If you can do this with all SGX stalwarts, you will be doing quite O. K. lah. You will be singing, "Don't worry be happy". Don't have to have a $million to be "RICH".
Sorry! Don't think there is a short-cut in Life as saying goes, "There is no free lunch except your own". (Modified version).
Shalom.

Well, Uncle Temp, I don't think it is a short-cut. The same amount of effort and mentality needed as other value investments.

The story is simple, but the hardest part is to find the right stalwarts, with discounted IV and sufficient MOS.

[CityFarmer]

Why do you think the electricity futures will be hot in Singapore? Given that the volatility of electricity is fairly low in Singapore and there is no private house to stimulate electricity futures demand, I am not confident of the product.

There is a void of hedging services for electricity in Singapore, not for private households, but for companies with huge energy demands. A predictable energy cost is vital for those companies, and the futures also provide predictable revenue for energy suppliers.

It is a win-win, and popular services, IMO. Well, as usual, I might be wrong

[Greenrookie]

My thoughts/ questions on this is:

SGX seem to be rolling out new derivative products rather frequently. Some did well, like Iron Ore Derivatives, some are well...under the radar.

What is the costs, if any, in rolling out these products? There are essential pieces of papers, and there is no need to store the physical products right? I do not think these will add much cost to the IT server support. Manpower perhaps is the only cost, but I guess the same team could multi-task??

If there is no real significant costs, SGX seem to be trying to roll out as many as possible to test market demand, they can close the products if they are unpopular. Am I correct?

Does this mean that its core business or attracting companies to list and raise capital, and to increase trading is losing competition??

[mulyc]

A case of too many cooks spoiling the broth. SGX should focus more on expanding its core product range rather than coming up with 'flavour of the month' products and unpopular derivatives. The above posters have highlighted quite a few of them and even things like Extended Settlement have been a waste of time.

they should spend more time working on partnering with other exchanges to allow SDRs (singapore depository receipts) or enhance the asean linkage to promote higher volume of trading on sgx blue chips.

their current efforts arn't enough to boost lagging volumes for sure.

[AlphaQuant]

I don't think the electricity futures market is a random product that they threw up. In 2013, SGX acquired 49% of Energy Market Company (EMC), which operates the National Electricity Market in Singapore, so they must have thought of some synergies.

Not familiar with how the electricity hedgers work/how deep the market is but I will guess they are hoping to create a hub for LNG and the related stuff.

I don't think the marginal costs for setting up a new derivative is extremely high - you probably need a few more blokes to do the clearing/documentation/limits monitoring/surveillance and upgrade the physical system for a few more nodes. If you look at SGX's cost structure, 15% of revenue goes to staff, and capex is ard 8%, so there's plenty of room given the current operating margins of >50%.

The main challenge in establishing a new product is to convince people to start playing. First the product must be trading in the spot/cash market, then you convince people that it is necessary to trade in the forwards/future market, and then you convince people to trade non-linear i.e. options, and then you need to convince as many people to play as possible to generate liquidity and 2-way interests (noone can play if everyone wants to just buy or just sell) - so it's abt choosing the right product and then convincing a bunch of people to play with it. Sometimes it takes off, sometimes it doesn't.

C'est La Vie.

[Temperament]

Like most things in life, "Begin with the end in Mind". We should always starts with a story, before any investment.

For me, SGX is a stalwart, base on Peter Lynch terminology. Stalwarts are stocks that generally buy for a desired gain, then sell and repeat the process with similar stories.

(vested)

Very true! If you can do this with all SGX stalwarts, you will be doing quite O. K. lah. You will be singing, "Don't worry be happy". Don't have to have a $million to be "RICH".
Sorry! Don't think there is a short-cut in Life as saying goes, "There is no free lunch except your own". (Modified version).
Shalom.

Well, Uncle Temp, I don't think it is a short-cut. The same amount of effort and mentality needed as other value investments.

The story is simple, but the hardest part is to find the right stalwarts, with discounted IV and sufficient MOS.

Well put indeed!

[csl123]

good for you, i also love SGX. my broker asked me to wait <6.30..
i just wait patiently..wonder will it really come down to <6.30

I am not saying SGX won't fall below $6.30, but when and if that happens, I believe there will be many other attractive buys as well, and you may not know which is the "best buy" then. It is important to do your own valuation of the company and invest according to your own plan, not your broker's plan. At $7, SGX yield is near to 4%. This is good enough for me taking into account that they are, and most likely will be the only exchange in Singapore for a long time to come. Beside, they are working hard to introduce new products, a positive development IMHO.

Vested.

Like most things in life, "Begin with the end in Mind". We should always start with a story, before any investment.

For me, SGX is a stalwart, base on Peter Lynch terminology. Stalwarts are stocks that generally buy for a desired gain, then sell and repeat the process with similar stories.

(vested)

I believe that SGX has the following characteristics which it very desirable for long term investors.

Strategically
1) Monopoly (Singapore is only big enough for one exchange in the next 20 yrs, IMO)
2) Capital flowing into Singapore dollar perceived as a safe haven currency. Equities and other instruments will benefit from this trend.

Financially
1) Strong operating cash flow and free cash flow
2) Consistent Dividend Payout

However, entering a position at the right valuation is still important.

[felixleong]

SGX is a good pick, if you can get it at 15 times earnings or less it would be a wonderful investment

[CityFarmer]

Like most things in life, "Begin with the end in Mind". We should always start with a story, before any investment.

For me, SGX is a stalwart, base on Peter Lynch terminology. Stalwarts are stocks that generally buy for a desired gain, then sell and repeat the process with similar stories.

(vested)

I believe that SGX has the following characteristics which it very desirable for long term investors.

Strategically
1) Monopoly (Singapore is only big enough for one exchange in the next 20 yrs, IMO)
2) Capital flowing into Singapore dollar perceived as a safe haven currency. Equities and other instruments will benefit from this trend.

Financially
1) Strong operating cash flow and free cash flow
2) Consistent Dividend Payout

However, entering a position at the right valuation is still important.

I agreed with most of the points, but let me add-on few more.

SGX's earning CAGR over the last 3 years was 1.6%, and over the last 5 years was -6.8%. The last peak was 2007, and last bottom was 2009. Will SGX go thru the same cycle again? It will and should be.

I am still in the process to convince myself that SGX is a grower that worth a long term holding of 10 years or longer.

(vested)