Singapore bourse to boost freight derivatives with pursuit of Baltic Exchange

Singapore Exchange. Credit:Today Online

Singapore Exchange‘s (SGX) bid to buy London’s Baltic Exchange is aimed at burnishing its derivatives credentials among ship brokers and commodity merchants, fitting hand in glove with its efforts to develop Asian pricing benchmarks for bulk commodities.

The bourse has struggled in recent years, losing out to Hong Kong as the main destination for large IPOs in the region and the proposed acquisition is one of several efforts by new CEO Loh Boon Chye to revive its fortunes.

Despite a deep rout in global commodities markets, the long-term market for freight derivatives and clearing holds promise, sources familiar with SGX’s strategy said, adding that it is keen to increase the appeal of its Asian pricing benchmarks for commodities such as iron ore, liquefied natural gas and coking coal.

“This will give SGX deeper coverage with many large clients with whom they already deal at some level,” said one of the sources.

The sources declined to be identified as they were not authorised to speak to the media on the matter. SGX declined to comment.

Singapore is the world’s second-busiest container port with over 130 international shipping groups based in the city-state and the government has positioned the sector as a key industry. And despite recent economic wobbles, long-term demand for bulk materials like iron ore and coal is expected to be strong as India, Indonesia and Central Asia follow China in targeting infrastructure development.

As such, gaining control of the Baltic, which is seeking to boost membership in Asia, would be a natural step for SGX.

The Baltic is owned by around 380 shareholders, many from the shipping industry. It produces daily benchmark rates and indices used globally to trade and settle freight contracts as well as data used in freight derivatives.

“Instead of trying to be a regional or global market, just be a sector-specific market where you seem to be able to price better, rather than try and be a competitor to Hong Kong” said Kevin Scully, executive chairman of equities research firm NRA Capital.

In addition to the bid for the Baltic, SGX’s Loh, who is just seven months in the job, is expanding the bourse‘s non-freight derivatives offerings, has launched a bond trading platform and is conducting a supervisory crackdown on errant firms.

The Baltic Exchange said last month it had received a number of “exploratory approaches” after SGX confirmed it was seeking to buy the business which has been the hub of the global shipping market for centuries. Sources had previously pegged the Baltic‘s valuation at just below $120 million.

The SGX is valued at $5.9 billion. The Baltic has previously rebuffed approaches from the London Metal Exchange.

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Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.