Singapore Exchange Limited Looks To Market Indices For A New Area Of Growth – Will It Work?

Earlier today, Singapore Exchange Limited (SGX: S68) had announced the launch of SGX Index Edge, a new business that “will create and offer comprehensive index services tailored for issuers, asset managers and investors in Asia.”

The new business was started by Singapore Exchange, Singapore’s sole bourse-operator, to meet a growing demand in Asia for investments that are related to market indices. The indices that fall under the ‘SGX’ brand will “provide greater transparency,” according to Singapore Exchange.

In the official press release for the product launch, Tinku Gupta, Singapore Exchange’s Head of Market Data and Connectivity, explained that the new service can help the bourse operator attract institutional investors who are gravitating toward index-based investments.

Singapore Exchange had been working on a beta-launch of the SGX Access Asia indices – a series of futures-based indices – since October 2014. The new indices are suitable for issuers of products such as Exchange Traded Notes.

It’d appear that Singapore Exchange’s game plan is to become a strong provider of market indices in Asia. Loh Boon Chye, Singapore Exchange’s new chief executive who took over only in July, mentioned in the press release that SGX Index Edge is a demonstration of Singapore Exchange’s innovative capabilities in its quest “towards becoming the pan-Asian Index provider of choice.”

A Fool’s take

SGX Index Edge may become a potential growth area for Singapore Exchange. According to a report from the Investment Company Institute, Exchange-Traded Funds, most of which are linked to various types of market indices, is a US$2.7 trillion market globally (as of December 2014).

Moreover, as a sign of the rising popularity of ETFs globally, the number of ETFs in the U.S. and Europe have grown tremendously through the years. For the former, the number has expanded from 119 in 2003 to more than 1,400 in 2014, according to the Investment Company Institute; for the latter, see this.

It is still too early to see how the market will respond to SGX Index Edge, but there is a trend of growing demand for index-based investment products around the world – that may be promising for Singapore Exchange’s new business.

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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 writer Stanley Lim doesn’t own shares in any companies mentioned.