Fluent in Growth

If you listen carefully to investors, it’s clear that they all want the same thing: a venue that simplifies the trading process and makes their lives easier. That’s what Singapore Exchange Ltd. (SGX) will deliver by merging its cash equities and equity derivatives businesses.

With global markets facing tighter financial regulations and rising compliance costs, institutional participants are finding value in a single-platform approach that enhances the way they invest and manage risk. SGX’s newly formed Equities business unit aims to offer such a unified marketplace, where customers seeking to tap into Asia’s growth opportunities can access a range of tools and services that supports them in trading, clearing, post-trade and research.

“Our clients taught us many lessons about how to improve market quality, boost liquidity, enhance the ease of use and lower unnecessary costs,” said Head of Equities Michael Syn. “A lot of that comes down to enhancing communication and simplifying every aspect of the trading process. We’re bringing that knowledge and those lessons to the new platform.”

Asia’s emerging and developing economies are tipped to grow 6.2% in 2019, outpacing a projected global expansion of 3.2%. As a market infrastructure in the region’s only AAA-rated jurisdiction, SGX is well-positioned to offer what the international investor needs in terms of Asian capital, according to Syn. What can further set it apart from other exchanges is a service proposition that is both simple and efficient.

“Our purpose right now is in wealth management and access management,” he said. “As long as we stay true to that and play to our strengths, our growth and our future will be sustainable. Our new platform for cash equities and equities derivatives is the next step in that journey.”

Distinguished Wealth-Management Hub

Wealth management has long been one of Singapore’s strengths. A strong banking sector, sturdy regulatory framework and top-quality talent have seen the city-state develop into one of the world’s most attractive wealth-management hubs. As of 2017, nearly 83% of assets under management in Singapore originated from abroad, according to the Monetary Authority of Singapore.

The global trend of de-harmonization and de-globalization could raise the appeal of Singapore over other wealth-management hubs. Yet, even in the best times, Singapore stands out as one of the most attractive wealth-management hubs in the world.

“As a wealth-management center, Singapore has prominence as a jurisdiction for safe keeping, dispute resolution and final settlement,” Syn said. “From a wealth-management perspective, we have a highly rated stock market with high-dividend-yielding stocks situated in a stable, well-governed country. This is where equities deliver their value as long-term investments that managers can use to preserve and manage wealth.”

Gateway to Emerging Asia

Once a venture for bold investors, emerging markets have become hotbeds for innovation and offer tremendous potential. Singapore enables investors to tap into many of those opportunities and partake in Asia’s capital-formation process and has done for decades. With futures that track the MSCI Emerging Markets Index, India’s Nifty 50 Index and the FTSE China A50 Index, investors can access the potential of the world’s most dynamic emerging markets.

“MSCI and SGX have worked together since 1997 with the flagship listing of the MSCI Taiwan futures contract,” said George Harrington, Global Head of Futures and Options Licensing at MSCI . “Since then, SGX’s MSCI product suite has expanded to provide global investors access to many Asian regional and single-country markets, via more than 35 futures and options listings, with over 10 million contracts traded in the second quarter of 2019.”

Accessing those markets through Singapore – ranked by the World Bank as the second-easiest place to do business globally in 2019 – brings the benefits of modern risk-management tools from SGX backed by a time-tested regulatory framework. It also helps investors clear many of the hurdles that they would face in less mature markets.

“Emerging markets have become high-tech, they’re driving change,” Syn said. “Yet, most remain idiosyncratic. Investors need someone who provides access to derivatives in each of these countries in the way that they choose to look at them.”

Singapore – A Global Launchpad

The Singapore market for initial public offerings (IPOs) is tracking well. It saw 10 IPOs in the first seven months of 2019, raising S$2.4 billion in proceeds. Eight of those were foreign companies, reaffirming that Singapore remains an attractive international listing destination. Three of the listings were pure-play U.S. real estate investment trusts (REITs) and were the top three IPOs in ASEAN and 10 biggest in Asia ex-Japan by funds raised so far this year.

The success of Singapore’s REITs sector is due to a combination of factors, including Singapore being an early mover in this space and the government putting in place an effective regulatory and tax framework. Since SGX’s first REIT listing in 2002, the exchange has strengthened its position as a true Asian hub and most of its REITs and property trust listings hold overseas assets, signaling the emergence of Singapore as a global center for REITs.

SGX is also a launchpad for innovative futures. It partnered with MSCI to launch Emerging Asia Net Total Return (NTR) futures in 2017. By the end of June 2019, its NTR suite had an open interest of 814,000 contracts and a notional value of S$32 billion.

“MSCI and SGX will continue to work together to help global clients gain access to Asian equity markets and meet their investing needs,” Harrington said.

“When we say we’re fluent in growth, that doesn’t mean we’re going to launch this and IPO that just because we can,” Syn added. “We always ask ourselves three questions: Where are we starting from? What do we represent? And what is the future? That’s the fluency in growth that we’re trying to convey.”