SGX Q3 profit hits 13-year high as trading volume surges amid pandemic

SINGAPORE (REUTERS) - Singapore Exchange reported a 38 per cent jump in quarterly net profit to a 13-year high, as extreme market volatility amid the coronavirus outbreak boosted equities and derivatives trading volumes.

Other exchanges are also likely to benefit from the rising volatility, although SGX's strength in derivative products means it is particularly well placed among Asian bourses to do so.

"With uncertainty around the eventual economic and financial impact of Covid-19 and path to recovery, these elevated levels of volatility are likely to be prolonged," CEO Loh Boon Chye said in a statement on Friday (April 24).

SGX's net profit rose to $137.5 million in the January to March quarter from a year earlier, while total revenue jumped 29 per cent to $295.8 million - a record - according to Refinitiv data.

Earnings per share came in at 12.8 cents for the third quarter, up from 9.3 cents in the year-ago period.

SGX declared an interim cash dividend of 7.5 cents per share for the quarter, unchanged from a year ago.

SGX's strong results bode well for its main rival in Asia, Hong Kong Exchanges and Clearing (HKEX), which reports January-March results next month and has seen double-digit percentage increases in trading volumes this year.

Its net profit could rise 6.8 per cent to HK$2.8 billion ($360 million), according to an average forecast from two analysts polled by Refinitiv. That would also be a record level for quarterly profit, even if the climb in earnings is less marked than SGX's jump.

"There is a tendency for Singapore do to better than Hong Kong in this sort of environment. Hong Kong is very equity focused, while Singapore has a wider and more established range of derivatives products, which will be used for hedging," said Michael Wu, an analyst at Morningstar.

SGX said revenue from currencies and commodities derivatives trading climbed 23 per cent, accounting for 14 per cent of overall revenue, while revenue from equities derivatives trading rose 24 per cent and accounted for 36 per cent of overall revenue.

Citi analyst Robert Kong cautioned in a note that data so far in April suggested the daily average value of equities securities trading had fallen 37 per cent from March, while derivatives trading had also moderated from record levels seen last month.

"We still prefer SGX over banks but recognize that moderating turnover suggests a less upbeat earnings trajectory going forward," he said.

SGX's shares were down 3 per cent on Friday but are still up more than 10 per cent this year compared with a 22 per cent slump in the main Straits Times index.

The SGX chief said trading activity outside of Asian trading hours by its US and European clients has grown to 20 per cent of total derivatives volumes.

"Amid the Covid-19 pandemic, our priority is to keep SGX's markets relevant, resilient and fully accessible round-the-clock, to serve the heightened demand from market participants for risk management solutions and investment opportunities across our asset classes," said Mr Loh.

He added that SGX will be adopting half-yearly financial reporting from July 1, though dividends will continue to be paid on a quarterly basis.