Punters back SGX's efforts to upgrade infrastructure

SGX has pledged to spend $20 million on infrastructure upgrades and $1 million on investor education after Wednesday's stinging Monetary Authority of Singapore report on the trading glitches late last year.
SGX has pledged to spend $20 million on infrastructure upgrades and $1 million on investor education after Wednesday's stinging Monetary Authority of Singapore report on the trading glitches late last year.PHOTO: BLOOMBERG NEWS

Shares rise after it pledges to spend $20m on preventing trading glitches

INVESTORS backed Singapore Exchange (SGX) moves to strengthen its capabilities to prevent more trading disruptions by sending the shares up yesterday.

The stock closed 10 cents or 1.28 per cent up at $7.94, with about 3.4 million shares changing hands.

The slight uptick followed SGX pledges to spend $20 million on infrastructure upgrades and $1 million on investor education after Wednesday's stinging Monetary Authority of Singapore report on the trading glitches late last year.

A moratorium was also imposed on any SGX fee increases until MAS is satisfied with the improvements made.

PwC's information technology risk leader, Mr Tan Shong Ye, applauded the SGX move, saying "$20 million is a significant but reasonable investment".

He added: "IT infrastructure is extremely important because technology is at the core of the exchange business."

But analysts said they do not see yesterday's share rise as the start of a genuine rebound after last month's selldown, caused partly by pullback after the rumours of a Singapore-Shanghai Stock Connect were burst.

"The commitments SGX has made are a right step but it'll take a lot more to restore public confidence in the bourse," said IG analyst Bernard Aw.

"It doesn't help that SGX is now going through a leadership transition. Investors will be cautious about how the upcoming chief executive will bring SGX forward, especially in the securities business," he added.

SGX chief executive Magnus Bocker steps down on Tuesday and will be replaced by Mr Loh Boon Chye. Mr Bocker will leave behind an SGX whose derivatives segment has grown but has a struggling securities arm.

Securities revenue grew just 1 per cent year on year in the three months to March 31, while derivatives turnover jumped 52 per cent to help push net profit up 16 per cent to $88.2 million.

Remisier Desmond Leong said profit levels have largely been between $70 million and $80 million for at least three years.

He added that this quarter to June 30 will also be stable despite the $20 million commitment on infrastructure investment.

"The spending does not actually have a timeline, and I doubt it will have a major impact on its earnings," he said.

Said Mr Leong: "The impact from the temporary ban on fee increases should be minor as SGX doesn't adjust its fee structure regularly. But all this is just the first step that SGX needs to take - many challenges still remain.

"Mr Loh's top priority should be to revitalise the equity market here by attracting more new listings, which tend to draw in new, foreign liquidity that the Singapore market desperately needs."

whwong@sph.com.sg

A version of this article appeared in the print edition of The Straits Times on June 26, 2015, with the headline 'Punters back SGX's efforts to upgrade infrastructure'. Print Edition | Subscribe