SGX sees better IPO market in next 6 months

SINGAPORE - The Singapore Exchange (SGX) expects more new listings in the next six months amid improved market conditions, chief executive Loh Boon Chye said on Thursday even as he fended off questions about the competition.

Mr Loh made those comments when the market operator said that net profit rose 5.5 per cent to S$88.3 million for its second fiscal quarter on higher activity in its securities market.

On a per share basis, that comes to 8.2 Singapore cents for the three months ended Dec 31, 2016.

For the six months ended December, net profit fell 6.3 per cent to S$171.4 million, or 16 cents per share.

SGX is declaring a dividend of five cents per share for the quarter, in line with its year-ago payout.

A 17 per cent increase in daily average traded value, to S$1.09 billion, drove the better quarterly results.

"Our results this past quarter reflect higher levels of market activities compared to a year earlier as the conclusion of the US presidential election and clarity on the interest rates environment brought participants back to the market," he said.

He added that SGX's strategy of focusing on certain key industry sectors such as infrastructure, consumer, healthcare and technology was paying off.

Mr Loh expects the number of IPOs and IPO proceeds in the six months and full year ending June 2017 to surpass that of a year earlier, subject to market conditions.

"We are encouraged by the healthy pipeline of companies from our key sectors seeking listing on both the Main board and Catalist," he said.

SGX's derivatives business posted a 3 per cent decline in revenue, to S$75 million, as average fee per contract shrank to S$1.16 from S$1.28 a year earlier.

That was a result of changes in the mix of derivatives contracts traded, as well as rebates and incentives offered in the iron ore contracts as other exchanges offer their own iron ore products.

"Our view on SGX being very well positioned to capture the growth opportunities in iron ore remains," Mr Loh said. "We are focused on maintaining and building that market share, and have sustained that market share at over 90 per cent."

Competition also loomed on the regulatory side, with Hong Kong Exchanges and Clearing on Thursday saying that it would reconsider allowing dual-class shares.

SGX began studying the issue in 2016, and will release a consultation paper by March 31. "An interesting development at an interesting time," Mr Loh described the Hong Kong move.

Looking ahead, SGX said that "while market sentiments have improved, uncertainty around future US policies and slowing Asian economies will influence trading activity going forward".

SGX also said on Thursday that it would sell its entire 4.75 per cent stake in the Bombay Stock Exchange (BSE) via BSE's initial public offering for S$42.8 million to S$42.9 million, making a loss of about S$2 million.

The IPO is expected to close on Jan 25. Mr Loh said that SGX remains interested in India, but would explore other ways to remain exposed to that market.

This article was first published on Jan 20, 2017.
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