April 16, 2013 4:51 pm

SGX earnings boosted by trading surge

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SGX, the Singapore exchange, turned in its best quarterly earnings performance for five years as monetary easing in Japan helped drive trading volumes and spurred activity at Asian exchanges as their western counterparts were left behind.

The bourse reported a 26 per cent jump in net profit to S$98m in its financial third quarter, on the back of a 17 per cent rise in revenue to S$191m.

Average daily volume in securities – mostly equities – was 17 per cent higher than a year earlier at S$1.7bn, and 41 per cent higher month on month. It accounted for 39 per cent of group revenue in the quarter.

While exchanges in the US and Europe have continued to suffer relatively low volumes, their counterparts in Asia have enjoyed an unexpected surge in volume as anticipation of monetary easing by the Bank of Japan – followed by the enactment of the policy by central bank governor Haruhiko Kuroda – has spurred activity.

Derivatives trading at SGX, which has been steadily growing as a proportion of the exchange’s overall business, increased 26 per cent to S$53.6m. SGX said that accounted for most of the rise in revenue.

The exchange’s largest derivatives product by volume, a futures contract on the Nikkei-225 index, also grew 52 per cent in the quarter.

In a key sign of derivatives growth, the amount of “open interest” in trades held at SGX’s clearing house doubled to 2.9m contracts from the same period a year ago.

Open interest refers to the number of futures contracts left at the end of the day that are not closed off and shows the commitment of market participants to continue trading the next day.

“We should probably give some thanks to Abenomics,” said Magnus Böcker, SGX chief executive, referring to the economic programme of Shinzo Abe, Japan’s new prime minister.

However, he added: “Global economic conditions remain volatile. It is uncertain if current market conditions will persist. We are always a little bit cautious . . . and that will hold us back on being overly optimistic.”

The Japan Exchange, formed last year by a combination of the Tokyo Stock Exchange and Osaka Securities Exchange, has seen volumes rise since November amid a sustained market rally, driven by heavy trading on rising hopes for monetary easing. That continued when the policy was launched this month.

The exchange said this month that average daily trading volume in Topix futures rose 17 per cent for the full year – the third-highest volume in the history of the Tokyo Stock Exchange.

Hong Kong Exchanges & Clearing reported an 18 per cent rise in average daily volume in securities for the first three months of this year, compared with the same period a year earlier. Futures and options volume in the period was 12 per cent higher.

By contrast average daily trading volume at NYSE Euronext’s derivatives arm, NYSE Liffe, was flat at 8m contracts in March compared with the same month a year earlier, and fell by 7.8 per cent from the previous month.

In equities, volume on the group’s Euronext network of European bourses fell 14 per cent in March, compared with a year earlier.

Shares in SGX closed up 0.52 per cent at S$7.70.

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