SGX's Q3 profit up 38% as trading volumes soar

Earnings at the Singapore Exchange (SGX) rocketed in the third quarter on the back of soaring trading volumes amid the pandemic.

Net profit came in at $137.5 million in the three months to March 31, up 38 per cent on the same period last year. Revenue was a little less frothy, up 29 per cent to $295.8 million, it reported yesterday.

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," SGX chief executive Loh Boon Chye said.

Earnings per share came in at 12.8 cents for the quarter, up 38 per cent from 9.3 cents a year earlier.

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

Turnover from currency and commodity derivatives trading climbed 23 per cent, accounting for 14 per cent of overall revenue, while equities derivatives trading rose 24 per cent and contributed 36 per cent of overall revenue.

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

"There is a tendency for Singapore to do 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 Morningstar analyst Michael Wu.

Citi analyst Robert Kong noted that data so far this month suggests that the daily average value of equities securities trading has fallen 37 per cent from last month, while derivatives trading had moderated from the record levels seen then.

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

SGX shares closed down 5 per cent to $9.64 yesterday but are still up around 10 per cent this year, compared with a 22 per cent slump in the Straits Times index.

Mr Loh said trading activity outside of Asian market hours by United States 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," said Mr Loh. He added that SGX will adopt half-yearly reporting from July 1, although dividends will continue to be paid on a quarterly basis.