Bourse operator the Singapore Exchange (SGX) has suffered a fall in first-quarter earnings after jittery investor sentiment led to weak trading activity in recent months.
Despite the ongoing uncertainty, the SGX sees bright spots in the ongoing acquisition of the Baltic Exchange as well as its efforts to woo new listings for core sectors.
SGX posted a net profit of $83.1 million for the three months ended Sept 30, down 16 per cent from a year earlier, as revenue fell 13 per cent year on year to $190.8 million.
An interim dividend of five cents per share was declared, unchanged from a year earlier.
"The results reflected lower levels of market activities compared with a year ago when we had more onshore market volatilities that benefited volume and revenue," chief executive Loh Boon Chye told a results briefing yesterday.
"Increased concerns of slowing global economy, the debate around the United States and European elections, the US interest rate debate - all these could either increase volatility which will be good for volume, or lead to a period of subdued volume if market participants decide to adopt a cautious approach," he added.
AT A GLANCE
$190.8 million (-13%)
$83.1 million (-16%)
5 cents per share (unchanged)
For the first quarter, the slowdown was visible across the board, with securities trading and clearing revenue - which was a quarter of the group's total - dropping 16 per cent to $47.1 million.
The securities daily average traded value, which is a key gauge of stock trading activity level, was down by 19 per cent to $0.99 billion, while total traded value fell 17 per cent to $62.2 billion.
The stock market stagnated despite the eight new listings in the period that combined to raise $647 million, against the seven listings raising $103.9 million a year ago.
The derivatives unit also suffered, with revenue diving 22 per cent to $70.8 million, or 37 per cent of the group's total. Total volume shrank 24 per cent, mostly dragged down by the SGX FTSE China A50 and Nikkei 225 futures.
While there is no guarantee that volumes will rebound, SGX is counting on completing the acquisition of Baltic Exchange by the end of next month. The £87 million (S$148 million) deal was yesterday approved by the British regulator, removing the last obstacle for the transaction.
The Baltic Exchange manages a range of indices and pricing benchmarks used globally for freight contract settlement and freight rate hedging. It is expected to complement SGX's derivatives business, while index licensing and membership fees will also add to earnings.
Meanwhile, SGX "is seeing a better listing pipeline" due to efforts to draw new listings in the real estate investment trust, consumer and healthcare sectors, Mr Loh said.
But the bourse will remain cautious amid the challenging business environment through cost management.
Expenses for the first quarter were reduced by 8 per cent to $93.7 million, with spending on all items tightened up.
Earnings per share was 7.8 cents, down from 9.3 cents a year earlier. Net asset value per share was 82.1 cents as at Sept 30, down from 92.5 cents at the end of the previous quarter.
SGX shares closed one cent or 0.14 per cent lower at $7.22, ahead of the results announcement.