SGX share price: what you should know ahead of its Q4, FY2019 results

The Singapore Exchange (SGX) will be reporting its fourth quarter results for the three months ended June 30, 2019 and the performance results for its full-financial year concurrently after the market closes next Wednesday (July 31, 2019).

The SGX operates several different divisions, including securities trading, derivatives trading, and their related clearing houses. The companies listed on the exchange belong to either the mainboard or the smaller catalist board.

According to Nikkei Asian Review, the exchange offers the world's largest offshore market for Asian equities index derivatives. About 40% of the companies listed on SGX originate from overseas.

The exchange was founded in 1999 through a consolidation of three Singaporean companies that ran exchanges and clearing services, namely the Stock Exchange of Singapore (SES), the Singapore International Monetary Exchange (Simex), and the Securities Clearing and Computer Services (SCCS). The majority shareholder of SGX is Temasek Holdings, holding a non-voting stake of 23.3%.

Net profit slipped 0.8% to S$99.7 million in the previous quarter

SGX posted a 0.8% fall in net profit for the third quarter ended March 31, 2019, at S$99.7 million from S$100.5 million a year ago.

Operating revenue rose by 2.9% to S$228.8 million, from S$222.2 million a year ago. An interim dividend of 7.5 Singapore cents per share was announced for the three months, compared to five Singapore cents a year ago.

For the three months, the exchange said it delivered a record derivatives performance, registering daily average volume of more than one million contracts for the first time during the quarter.

SGX saw increased activity and higher open interest amid strong institutional demand, SGX’s chief executive Loh Boon Chye had said in the earnings statement, as ‘clients continued to use our multi-asset platform to manage their portfolios across equities, currencies and commodities’.

SGX share price reaches a 52-week high

As of Thursday’s (25 July, 2019) price of S$8.05 per share, SGX stocks have risen by 12.3% year-to-date, from S$7.17 on January 2, 2019.

At S$8.05, SGX's share price has reached its peak price in the last 52 weeks, hitting a market capitalization value of S$8.62 billion. The last time the share price of SGX closed higher than S$8.05 was on February 2, 2018 when it reached S$8.16.

It has been a volatile year thus far for equities, as markets reacted to the escalated trade tensions between the United States (US) and China earlier this year, with the SGX sinking to as low as S$7.25-levels. The trade truce between both countries over the last few weeks has brought some relief to markets, causing some trading optimism to return and SGX's share price climbing back to S$8.00-levels.

Pause in interest rate hikes to benefit equities, REIT sector

In the third quarter earnings release, SGX’s chief Loh said that the recent halt in interest rate hikes is set to benefit the equities markets, especially the real estate investment trust (REIT) sector.

The US Fed is expected to cut interest rates this month and markets are predicting for a 25 basis point cut. Analysts are forecasting for either one or two more rate cuts this year, bringing interest rates back to where they were in May 2018. When interest rates fall, consumers and businesses will increase spending, and that would often lead to a rise in stock prices.

For the third quarter, the exchange’s REIT sector remained an outperformer with higher turnover, contributing to 20% of the overall securities daily average value.

On its outlook, the group said its performance is on track, with forex emerging as a promising growth pillar. It also lauded its derivatives business, calling it the ‘only exchange that provides comprehensive access to Asian markets across asset classes’.

Loh said SGX’s derivatives products will open up opportunities to capture new revenue streams in the coming years.

Delistings to shave off value just as more launches are added onto the table

On average, the Singapore stock market has been witnessing two companies drop out of its listing status every month for this year. According to a DBS report released this month, 14 firms are undergoing privatisation or in the process of being bought out this year, the highest number since 2016.

The SGX revised the rules to its voluntary delisting earlier this month, a rule which will make it more costly to delist. However, according to a Bloomberg poll, the trend of delistings is likely to continue into the second half of this year due to the low valuation of companies.

The plight is however, not dire, as equity offerings in Singapore are offering a buffer, having climbed US$1.67 billion in initial share sales this year - which is more than the entire amount issued for the whole of last year - data compiled by Bloomberg showed.

Two notable listings on SGX this year are the ARA US Hospitality Trust and the Eagle Hospitality REIT, which accounted for 96% of total funds raised with S$1.49 billion in proceeds as at listing launch, according to data from consultancy firm Deloitte.