Warchest is Ready - Taking Aim at SGX (S68)

With my warchest ready, I've been taking a look at Singapore Exchange [SGX] (S68) after talking with a friend from college (his name is Kean, and there is a link to his own blog in my links section). This counter is relatively ignored among my peers, but I figure increased trading volume from the recent bull-run could benefit SGX, especially if good sentiment persists throughout 2017.

FY2016 results demonstrated a 5% increase in revenue, from S$779 million to S$818 million, mainly driven by SGX's Derivatives segment (from an increase in volume in Iron Ore contracts and SGX FTSE China A50 Index futures). FY2016 numbers for net profit remained unchanged from FY2015's at S$349 million, due to higher expenses in technology and staff.

This was all before Trump was elected US President, and the markets took off in a bull run. The STI is currently sitting at 3100+ levels, a sharp rise from November 2016 levels. In fact, overall market statistics for February 2017 showed decent growth in year-on-year volume in Securities (17%) alone, with Securities Daily Average Value (SDAV) at S$1.4 billion, up 11% year-on-year. 2 new Catalist listings during the month raised S$49.2 million on their own. With the much-hyped Kimly Limited's IPO, and with other potential IPOs to come (e.g. potentially Netlink Trust, and Aramco if SGX offers enough incentive for them to enable dual-listing), I expect much greater turnover for FY2017 under the new CEO's charge.

Additionally, there are discussions for SGX to become the first Asian bourse to allow dual-class listing of shares, which speculators think could enable SGX to compete for big international listings. This, if properly done without alienating retailers, would mean higher volume for SGX and more major IPOs as well.

There were talks of implementing a lunch-hour break for the Singapore stock market recently. If it does come to pass, I expect trading volume to dip, but overall volume/SDAV should be bolstered by the recent bull-run and by the increased number of IPOs in FY2017.

I've decided to pick up 1000 shares of SGX at 7.55 earlier this week. The 52-week high was 8.05 in April of last year, when the market recovered from the bear market in late 2015/early 2016. Due to higher turnover, and potential implementation of policies that would improve trading volume, I expect to see SGX's price move towards 8.00 as the middle of the year approaches. SGX closed at 7.70 on Friday.

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In the meantime, I've also increased my holdings in ST Engineering and Keppel DC Reit. I'm a believer in their link to Singapore's Smart Nation ideal, and I believe they'll do well.

Until next time.


Creed