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SGX warns about near-term market outlook

The Singapore Exchange has warned that market activity in the near term could be affected by concerns over the global economy.

It reported on Tuesday that its net profit was little changed in the fourth quarter from a year earlier at S$79.5 million, although it did take a hit from the failed merger with the Australian Stock Exchange.

While earnings beat the market consensus, operating revenue dropped to S$160.6 million, as volumes declined.

The failed merger between ASX and SGX proved to be the main drag on full-year net profit. Although the deal collapsed, it still cost SGX some S$18 million in related fees.

Its bid to buy rival ASX for over S$10 billion was blocked by the Australian government earlier this year.

As speculation continues to swirl in the market over other potential mergers, SGX played down those rumours at its results briefing.

SGX CEO Magnus Bocker said: “We will continue, very clearly, on organic growth. We see so many opportunities in all our different business areas – whether be it in this stock exchange … business, derivatives business, or … the bond market, which I think is an untapped opportunity for the Singapore Exchange.”

For the full year, SGX posted a net profit of S$295 million, an 8 percent drop year-on-year. This was partly due to a weaker performance in its securities business.

Operating revenue rose by 3.3 percent to S$661 million.

SGX noted that it was a tough year for global markets. It said securities turnover velocity and trading activities declined across markets.

“We are pleased with our performance despite a difficult environment for markets globally.” said Mr Bocker.

He added that while SGX has a strong pipeline of IPOs, market conditions were not right for some of them yet.

Mr Kenneth Ng, executive director of CIMB Research, said: “The past few quarters have shown that this is an exchange investing ahead in the midst of tough times.

“There are now two main questions facing SGX. Firstly, when will market sentiment turn around, as it has been rather downcast lately, and secondly when will SGX’s initiatives start showing more tangible contributions towards revenue?”

SGX has proposed a final dividend of 15 cents per share, bringing full-year dividend to 27 cents per share, similar to last year. There was no special dividend, as some had expected.

Muthukrishnan Ramaswami, president and acting CFO of SGX, said: “In today’s context of a changing regulatory environment and the need for capital around the world, I think exchanges and clearing houses will be subject to changing requirements.

“I think … being a prudent clearing house and an exchange, we wouldn’t today be looking to do any one-off dividend.”

Going forward, the exchange is set to roll out its new trading engine, said to be the world’s fastest, on August 15. With the improved speed, it will be able to roll out new products and attract high frequency traders.

Adapted from CNA (By Ryan Huang)

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