Trading on the Singapore Exchange does not take place in a geographical vacuum. Indeed, having built itself up as the Asian Gateway, the SGX is well-aware of the importance of getting along with one’s neighbours.
In the wake of our recent post on investing in overseas stocks, we now take a quick look at Singapore’s closest neighbouring exchanges, and how the SGX works with its ASEAN counterparts to create a more dynamic investment eco-system for investors than ever before.
Next Door Neighbours of the SGX
1. Bursa Malaysia
Formerly known as the Kuala Lumpur Stock Exchange, Bursa Malaysia (MYX) was established in 1973. With more than 900 listed companies, the MYX has a market cap of MYR700 billion (USD189billion) and is now one of the biggest stock exchanges in Asia. Its two main boards are the Main Market for large cap stocks, and the ACE market for stocks on the rise. The MYX’s main index is the FTSE Bursa Malaysia KLCI.
2. Hanoi Stock Exchange
Formally up and running in 2005, the Hanoi Stock Exchange (HNX) has 379 listed companies and a market cap of USD6.7 billion. The HNX started out as the Hanoi Securities Trading Center (Hanoi STC), Vietnam’s second securities trading center, before becoming the HNX in 2009.
3. Ho Chi Minh City Stock Exchange
Vietnam’s biggest bourse, the Ho Chi Minh City Stock Exchange (HOSE) has 310 companies listed on its boards, and a market cap of USD50.1 billion. To trade on the HOSE, foreigners have to get a securities transaction code which can be obtained by registering with a custodian who is licensed to hold securities for overseas investors.
4. Indonesia Stock Exchange
In 2007, the Jakarta Stock Exchange joined forces with the Surabaya Stock Exchange to become the Indonesia Stock Exchange (IDX) as we know it today. Tracing its earliest beginnings to 1912, the IDX now has 532 listings and a market cap of IDR5.226 trillion. The IDX also has the KEHATI-SRI (Sustainable Responsible Investment) Index, which lists businesses that are environmentally aware and have good corporate governance.
5. Philippine Stock Exchange
The Philippine Stock Exchange (PSE) is the result of a 1992 merger between the Manila Stock Exchange (established in 1927) and the Makati Stock Exchange (formed in 1963). The combined bourse now has 312 listed companies and a market cap of PHP12.65 trillion (USD275.655 billion). The PSE was named the Best Stock Exchange in Southeast Asia in 2014 and 2015 for its capital raising activities and corporate governance initiatives.
6. Stock Exchange of Thailand
The first Thai stock market began in 1962, which renamed itself as the Bangkok Stock Exchange (BSE) the following year. The BSE closed early the following decade, but was replaced by the Securities Exchange of Thailand in 1975. Today, the Stock Exchange of Thailand (SET) has 634 companies listed on it, and a market cap of THB13.55 billion.
All in this together: ASEAN Exchanges
Together with the SGX, the six bourses listed above make up ASEAN Exchanges, a collaborative initiative that aims to facilitate the growth of all the member markets. By joining forces within a single stock market, all seven exchanges will be able to
- Encourage more investments into ASEAN from local and global investors
- Promote trade flows between member nations
- Make each bourse more accessible to the other six
- Launch financial products that apply to the entire region
- Boost the operational efficiency of each member market
ASEAN Exchanges started out in 2011, with only the MYX, SGX, SET and the PSE, with latter as the Exchanges’ operating channel. Singaporean company, SunGard Gobal Trading, was chosen to set up the necessary digital platform and infrastructure to enable cross-trading between the member markets.
Now with seven stock exchanges from six countries, ASEAN Exchanges has about 3,600 listed companies between them and a market cap of some USD2.9 trillion. This puts the Exchanges on a level with the world’s top 10 stock markets in terms of market cap, which in turn means enhanced liquidity, stock price accessibility and inter-market trading.
ASEAN Trading Link
Within ASEAN Exchanges, MYX, the SGX and the SET got together to form a digital network called the ASEAN Trading Link. This link gives the other ASEAN exchanges a single hub or access point for investors to place orders in their local stock markets to be carried out in the other member markets.
An investor in Singapore, for instance, who wishes to invest in a company in Bangkok, needs only to get in touch with his local stock broker and tell him which shares to buy on the SET. The broker passes, as it were, through the ASEAN Trading Link to reach his fellow broker in Thailand. Once the Thai broker works out the details of the trade, the purchase is then settled on the Singaporean side in Singaporean dollars.
ASEAN All Stars
To attract investors to the big new bourse, and to get them to invest into the region as a whole, ASEAN Exchanges has also drawn up a list of 180 blue chip stocks called the ASEAN Stars. The ASEAN Stars lists 30 companies each from the IDX, MYX, PSE, SGX and SET, and 15 companies each from the HOSE and HNX.
Indices such as the FTSE ASEAN Stars Index, which keeps track of the blue chips above, serve as market barometers for the ASEAN Exchange. These include the
- All-Share Index
- All-Share ex Developed Index
- 40 Index
- Sector Indices
Since its inception, however, the new integrated bourse has not been without its fair share of speed bumps on the road to becoming a well-oiled intra-regional trading machine. Hiromi Hayashi of the Nikkei Asian Review points out that:
- As of last year, other member markets, such as the PSE, had yet to join up with the ASEAN Trading Link.
- Solid statistics have yet to show how well the link and the ASEAN Exchanges set-up as a whole is working to improve the market performance of each member market.
- Trading regulations among the member markets need to be standardised among all Exchanges members.
It may be noted, however, that ASEAN Exchanges members continue to make efforts to improve their operations. The ASEAN Disclosure Standards used by the MYX, SGX and SET, particularly address the standardisation issue in the third point above.
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