The Singapore Exchange (SGX) is exploring mergers and acquisitions (M&A) to drive its ambitions as a multi-asset exchange.
The bourse has operations in place across asset classes and will now concentrate on bolstering them, chief executive Loh Boon Chye said in an interview on Wednesday.
That means seeking deals that bulk up the foreign exchange, fixed income, data and capital markets connectivity businesses.
SGX had previously set a goal to have the fixed income, currencies and commodities segment, along with data, connectivity and indexes, double revenues by about 2025. It may reach that goal before the initial target date, Mr Loh said, adding that the segments combined could account for 50 per cent of revenue by then.
"We are not stopping our M&A focus," Mr Loh said. "We have said we will bulk up, and given that we are now a multi-asset exchange, one of the ways is to also scale up further. We will look at acquisitions."
The bourse is hardly a newcomer on the M&A front. Since the beginning of last year alone, it has entered a flurry of deals to boost its non-equity businesses, most recently announcing joint ventures to spin off its bond trading platform and provide digital-asset infrastructure. It snapped up the part of foreign exchange trading platform BidFX it did not already own, and acquired a majority stake in index provider Scientific Beta.
Still, it sees room for more.
Mr Loh declined to comment on the price tag of potential acquisitions, instead stating that valuations will be guided by the credit strength of SGX's clearinghouse and funds it can raise in capital markets. He all but ruled out participating in a round of consolidation among major exchanges, as rivals deploy varying growth strategies amid a low-rate environment.
Exchange M&A can be tough even at the best of times, with bourses often seen as national symbols and governments sometimes loath to let them go.
SGX found that out in 2011, when its proposed tie-up with ASX was scuppered by Australia.
While Switzerland's SIX was able to buy Spain's Bolsas y Mercados Espanoles last year and said last month it is seeking more deals, Hong Kong's exchange called off a bid for the London Stock Exchange Group in October 2019 amid opposition by the latter and a cool reception from Beijing.
"I'm not sure if exchange consolidation is a natural path going forward," Mr Loh said.
While SGX has made the move to a more multi-asset strategy, it still faces a tough domestic environment amid a lack of big-ticket listings and the continued struggle to emerge from Singapore's biggest economic contraction.
At the same time, rival hub Hong Kong is on a red-hot streak with share sales. Still, record bond issuance amid low interest rates globally and the growing importance of market data and passive investments are allowing exchanges to pursue growth in other areas.
Mr Loh took the helm in 2015, joining the exchange from Bank of America where he ran Asia-Pacific global markets. A career banker, his top priority at the time was to restore confidence in the market after a penny-stock crash.
Since his arrival, SGX's stock performance has been in the middle of the pack of the 27-member Bloomberg World Exchanges Index. Its gain of 20 per cent over that period beats Japan Exchange Group's 16 per cent rise, though rival HKEx has more than doubled.
The bourse restructured its business segments in 2019 in a bid to diversify outside equities, though as at last December, about two-thirds of revenue continued to come from its equities business.
Today, Mr Loh's focus is on finding bolt-on acquisitions in Asia and elsewhere, including potentially with co-investors.
Here are some more of Mr Loh's comments:
As Hong Kong's stock exchange prepares for a new chief, Mr Loh did not put a specific timeline on succession at SGX, saying that is "a board matter".
He added: "I hope, together with my team, we are delivering value to our shareholders and the overall capital markets ecosystem."
Sustainability is the biggest change for markets besides Covid-19, Mr Loh said, adding that for anything that is sustainability or environmental, social and corporate governance (ESG), the exchange will "double the pace" to achieve its objectives, which include listing more green bonds.
SGX is working towards rolling out infrastructure for carbon credits trading, in line with Singapore's goal to be a carbon credits market in Asia, and is on the lookout for partnerships.
Partners would include "players who want to look at offset, participants who can create the offset, the technology around that that could verify some of this, market structure, academia", Mr Loh said.