6 Quick Things Investors Should Learn About Singapore Exchange Limited

Singapore Exchange Limited (SGX: S68) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for Singapore Exchange is here).

As a bourse operator and more, Singapore Exchange – or more popularly known as SGX – gets its revenue from a number of different sources. This is evident from its many different business segments: Securities; Derivatives; Market Data and Connectivity; Depository Services; Issuer Services; and Others.

Through this different segments, SGX levies fees from the listing of securities, as well as for the clearing of securities trades and derivative contracts. It also earns its keep by providing market data feeds for risk management and back office applications.

You can read more about SGX in here and here.

What’s behind SGX’s results?

Below are 6 useful things I learned from listening to SGX’s webcast of its latest presentation for its fiscal fourth-quarter results for the financial year ending 30 June 2015 (FY2015):

  1. The earnings briefing was the first one for SGX’s new Chief Executive Officer Loh Boon Chye.  As such, it was Muthukrishnan Ramaswami, President of SGX, who took the lead for the presentation. Ramaswami pointed out the reduction of the board lot size and the 34 new company listings as among the key highlights for SGX for the fiscal year.
  2. Along with the change in the board lot size, the transition to a minimum trading price of 20 cents commenced in March 2015. Ramaswami said that there are about 200 companies which needed to consolidate and re-price its shares. About 40 companies have transitioned for this requirement and there are another 80 companies which had plans to do so. This transition process is expected to take three years.   
  3. The reduction of board lot sizes had an impact on the number of retail participants who are trading the 30 constituents of the Straits Times Index (SGX: ^STI), of which the SGX is one. The overall monthly average number of retail investors who participated in those trades stood at 45,330 for the six months that followed the reduction of the board lot size. It represents a 9% increase from the comparable six months period before the reduction took place. Ramaswami felt that the trend should sustain itself and grow further in the future with investor education and more.
  4. Moving to SGX’s outlook, Ramaswami touched on the possibility that the uncertainties around China may influence the company’s derivative trading volumes. This would be important to watch, as the derivatives segment was the stand-out performer in FY2015. Overall, SGX remains optimistic about its business prospects.
  5. Responding to a question on the lack of initial public offerings, Loh stressed on the need for SGX’s platform to be attractive, vibrant, and robust. He pointed to several efforts such as the direct listing framework in China and the streamlined secondary listing framework. Loh also pointed out that 40% of the listings were from outside of Singapore and that he considers SGX to be an international exchange. Loh also hinted towards attracting companies from India and other parts of Asia.
  6. Responding to another note, Ramaswami said that the volume of institutional trades has held up fairly well over time but the retail trading volume fell after the penny stock debacle in 2013. SGX will be focusing on bringing back retail customers and has been monitoring the engagement levels for this market segment.  

Foolish takeaway

To buy and hold a company’s shares for the long-term also means the need to keep up with developments in the firm’s business.

The access to management teams via webcasts and transcripts gives the Foolish investor a fair chance to judge for themselves whether they’d like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.