Singapore Exchange exploring M&As to become a multi-asset bourse, says CEO

REUTERS/Edgar Su

Singapore Exchange Ltd. is exploring mergers and acquisitions to drive its ambitions as a multi-asset exchange.

The bourse has operations in place across asset classes and now will concentrate on bolstering them, Chief Executive Officer Loh Boon Chye said in an interview on Wednesday.

That means seeking deals that bulk up the foreign exchange, fixed income, data and capital markets connectivity businesses. SGX had previously set a goal to have the fixed income, currencies, and commodities segment, along with data, connectivity, and indices, account for 50% of revenue by about 2025. It may reach that goal before the initial target date, he said.

“We are not stopping our M&A focus,” Loh said. “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.”

The bourse is hardly a newcomer on the M&A front. Since the beginning of 2020 alone, it has entered a flurry of deals to boost its non-equity businesses, most recently announcing joint ventures to spin off its bond trading platform and provide digital-asset infrastructure. It snapped up the part of foreign exchange trading platform BidFX it didn’t already own, and acquired a majority stake in index provider Scientific Beta Pte. Still, it sees room for more.

Loh declined to comment on the price tag of potential acquisitions, instead stating valuations will be guided by the credit strength of SGX’s clearinghouse and funds it can raise in capital markets. He all but ruled out participating in a round of consolidation among major exchanges, as rivals deploy varying growth strategies amid a low-rate environment.

Exchange M&A can be tough even at the best of times, with bourses often seen as national symbols and governments sometimes loath to let them go. SGX found that out in 2011, when its proposed tie-up with ASX Ltd. was scuppered by Australia.

While Switzerland’s SIX was able to buy Spain’s Bolsas y Mercados Espanoles SA last year and said last month it’s seeking more deals, Hong Kong’s exchange called off a bid for London Stock Exchange Group Plc in October 2019 amid opposition by the latter and a cool reception from Beijing.

“I’m not sure if exchange consolidation is a natural path going forward,” Loh said.

While SGX has made the move to a more multi-asset strategy, it still faces a tough domestic environment amid a lack of big-ticket listings and the continued struggle to emerge from Singapore’s biggest-ever economic contraction. At the same time, rival hub Hong Kong is on a red-hot streak with share sales. Still, record bond issuance amid low interest rates globally and the growing importance of market data and passive investments are allowing exchanges to pursue growth in other areas.

Bolt-On Deals

Loh took the helm in 2015, joining the exchange from Bank of America Corp. where he ran Asia-Pacific global markets. A career banker, his top priority at the time was to restore confidence in the Southeast Asian market after a penny-stock crash. Since his arrival, SGX’s stock performance has been in the middle of the pack of the 27-member Bloomberg World Exchanges Index. Its gain of 20% over that period beats Japan Exchange Group Inc.’s 16% rise, though rival HKEx has more than doubled.

The bourse restructured its business segments in 2019 in a bid to diversify outside equities, though as of this past December, about two-thirds of revenue continued to come from its equities business.

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

Here are some more of Loh’s comments:

Succession

As Hong Kong’s stock exchange prepares for a new chief, Loh didn’t put a specific timeline on succession at SGX, saying that’s “a board matter.” He added, “I hope together with my team, we are delivering value to our shareholders and the overall capital markets ecosystem.”

ESG

Sustainability is the biggest change for markets besides Covid-19, Loh said, adding that for anything that’s sustainability or ESG the exchange will “double the pace” to achieve its objectives, which include listing more green bonds

SGX is working toward rolling out infrastructure for carbon credits trading, in line with Singapore’s goal to be a carbon credits market in Asia, and is on the lookout for partnerships.

Partners would include “players who want to look at offset, participants who can create the offset, the technology around that that could verify some of this, market structure, academia,” Loh said.

Bloomberg

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.

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.