SGX to Seek Out Acquisition Targets to Drive Growth

SGX plans to continue its M&A focus to strengthen its FX, fixed income, data and capital markets connectivity businesses, says chief executive Loh Boon Chye.

SGX (Singapore Exchange) is reportedly planning to explore mergers and acquisitions to bolster its operations across asset classes and drive its ambitions as a multi-asset exchange.

According to Bloomberg, SGX chief Loh Boon Chye said the bourse will concentrate on acquisitions that will further build on its foreign exchange, fixed income, data and capital markets connectivity businesses.

“We are not stopping our M&A focus. We have said we will bulk up and given that we are now a multi-asset exchange, one of the ways is to also scale up further. We will look at acquisitions,” he said.

In 2019, SGX restructured its business segments in a bid to diversify outside equities. Last year, the exchange entered a number of deals to enhance its non-equity businesses, after several delistings and low trading volumes squeezed its equity trading core.

These included the acquisition of the part of FX trading platform BidFX it didn’t already own, and the purchase of a majority stake in index provider Scientific Beta. Still, around two-thirds of revenue continued to come from its equities business as of December 2020.

Loh had said at the end of July 2020 that future acquisitions would emphasise SGX’s multi-asset classes, including to develop its bond and commodities businesses.

SGX had previously set a goal to have its FICC (fixed income, currencies and commodities), data, connectivity and indices segments account for 50 percent of revenue by about 2025. Loh now says this target may be achieved even earlier.

For the year ended June 2020, SGX reported a 21 percent increase in net profit (SGD 472 million) and 16 percent growth in revenues (SGD 1.05 billion), on double digit growth in each of its units – Equities; Fixed Income, Currencies and Commodities; and Data, Connectivity and Indices.

Total revenue was the highest since SGX listed its stock in Singapore 20 years ago.

Currently, Loh’s focus is on finding bolt-on acquisitions in Asia and elsewhere, including potentially with co-investors.

SGX is also focused on achieving sustainability and ESG objectives, including by listing more green bonds, as well as working toward rolling out infrastructure for carbon credits trading, with the help of partners.

Earlier this month, SGX formed a joint venture with Trumid and Hillhouse Capital to launch a new electronic bond trading platform that will seek to enhance liquidity and execution in the Asian bond market for global clients.

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