SGX Second-Quarter Profit Falls 1.8% on Stock Trading

Singapore Exchange Ltd. (SGX), operator of Southeast Asia’s biggest bourse, said second-quarter profit fell 1.8 percent as a decline in equity trading volumes overshadowed an increase in derivative transactions.

Profit dropped to S$75 million ($59 million) in the three months ended Dec. 31, compared with S$76.3 million a year earlier, the bourse operator said in a statement. The company was expected to report a profit of S$71 million, according to a median of seven analyst estimates in a Bloomberg survey.

The exchange’s first earnings decline in five quarters came as brokerages restricted investments in riskier small-cap stocks after a drop in shares of three commodity companies erased $6.9 billion in market value over three days in October. Revenue from the trading of derivatives increased 16 percent to S$52.5 million in the three months, exceeding those from equities clearing and collateral management, which fell 13 percent to S$52.2 million.

“SGX has done the utmost to make sure they’re diversifying their business, and the result speaks for itself,” Kelly Teoh, a strategist at brokerage IG Ltd. in Singapore, said by phone.

Chief Executive Officer Magnus Bocker, who was appointed to the role in 2009, has expanded the bourse’s offering of derivatives that allow investors to trade stock futures from exchanges in Japan to India, as well as those for iron ore, rubber and coal as equity trading volumes decline.

Futures Contracts

A total of 23.56 million futures contracts changed hands in the second fiscal quarter, a 16 percent increase from a year earlier, according to SGX data. Stock trading on the SGX dropped 20 percent to a daily average of S$990 million in the three months ended Dec. 31 from a year earlier, data compiled by Bloomberg show.

SGX said it will pay shareholder an interim dividend of 4 Singapore cents a share.

“Relative to consensus, looks like derivatives a bit stronger which offset some of the equities weakness,” Arjan Van Veen, an analyst at Credit Suisse Group AG, said in an e-mail. Van veen had estimated second quarter net of S$75 million.

The bourse also said today it will add circuit breakers next month that protect investors from excessive stock swings. If the mechanism is triggered, investors can only trade within 10 percent of the reference price from at least five minutes earlier, according to the statement. Normal trading resumes five minutes later.

Shares of Blumont Group Ltd. (BLUM), Asiasons Capital Ltd. and LionGold Corp. (LIGO) tumbled at least 42 percent on Oct. 4, prompting the SGX to suspend the stocks. The central bank reviewed trading of those equities and said in a statement the selloff “surfaced broader issues regarding the market structure.”

UOB-Kay Hian Holdings, Singapore’s largest brokerage with about 800 brokers, had more than 50 stocks on its restricted trading list after the plunge, including Asiasons (ACAP), Blumont and LionGold, a document obtained by Bloomberg showed.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Jasmine Ng in Singapore at jng299@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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