Why invest in the SGX?

Dr. Clemen Chiang
Dr. Clemen Chiang

Asia, as an investment destination region, has always held a special allure for investors. To focus specifically on Southeast Asia, investors continue to bear witness to the dynamic new growth of each nation working tirelessly and unceasingly to boost its individual economy.

The stock exchanges in each of these countries may be said to be indicators of all this activity, and as the action intensifies, investors are presented with a wealth of investment options across the region. With all these choices spread out before them, why should investors wish to invest in Singapore’s own SGX?

The Singapore Exchange has faced several challenges of late, such as the penny stock crash of 2014, and the limited number of IPO’s being made on its boards. Even so, several, solid reasons remain for investing in the SGX — Spiking takes a quick look at why in terms of Singapore’s economy as a whole, and its Exchange, in particular.

The Singaporean Economy

Intelligent investors from the US and Europe should seriously consider adding Singapore to their investment allocation, says Forbes — Singapore allows investors to benefit from the exciting opportunities in the region minus the risks of political instability, lacking infrastructure and environmental degradation.

Echoing International Exchange Singapore, Forbes goes on to list factors leading to the city-states’s recognition as “the Switzerland of Asia”:

  • Singapore ranks first on the World Bank’s “Doing Business 2010” report as the easiest place in the world to do business.
  • The Singapore port is the busiest in Asia, with a highly diversified economic base comprising shipping, financial services, tourism and technology.
  • Superior quality of life, a literacy rate of 96.3%, and virtually no government corruption or crime.

Asean Today adds that Singapore is Southeast Asia’s largest financial hub, as well as the world’s fastest growing centre for private wealth. Singapore ranks sixth on a global listing of ultra-rich individuals, after New York, London, Hong Kong, Moscow and Los Angeles.

The Singapore Exchange

As the stock exchange of one of the world’s strongest economies, the SGX is an obvious investment choice, whose many standout features and achievements (which Spiking has discussed in a previous post) place it on the must-invest list of both domestic and overseas investors.

1. Having 800 listings and different departments such the SGX ETS (Electronic Trading System) gives investors a wide variety of investment options, as pointed out by The New Savvy. This is especially true considering the ETS provides worldwide trading access, and that 80% of ETS users are from overseas.

Investors also have a choice of listings on either the SGX Mainboard or the FTSE Straits Time Index, the performance benchmark and one of the biggest indices in the Singapore market. Whichever shares they choose, investors will be able to enjoy tax-free capital gains from the SGX.

2. Adding to the wide range of stock offerings on the SGX is the iShares MSCI Singapore Index — Forbes notes the Index as a cost-effective way to participate in the market, being the only exchange-traded fund with pure Singaporean exposure. US investors who wish to invest in Singapore may also be able to talk to their investment advisors about creating a portfolio comprising top Singapore stocks or bonds.

3. The SGX’s 44% return on equity, consistent dividend yield and dominant position as one of Asia’s prime trading hubs are just a few of the reasons Barrons Asia offers for investors’ consideration. The SGX posted solid growth in market data and clearing fees, and declared an SGD5-cent interim dividend, up from SGD4-cents.

The Exchange’s niche as Asia’s trading hub for derivatives, which bring in 40% of revenue, is supported by Singapore’s strong position in currency and commodities. The SGX also continues to work on encouraging investments with efforts such as revised trading rules.

One such rule reduced board lot sizes, which is considered a step in the right direction for improving equities volumes in the near future. Moneysmart likewise cited the rule for making a wider range of stocks accessible and affordable for more retail investors. SGXmygateway adds that the lower lot size also allows investors to reduce their overall portfolio risk.

The Singapore Exchange as a Gateway

The SGX has been especially active in demonstrating its capabilities as a gateway to Asia and the rest of the world. Ernst & Young reports the Exchange’s having made a name for itself as a destination for Asian listings, particularly for companies from countries whose stock markets are not globally recognised.

The SGX has also been successful in attracting private Chinese companies — Ei Study points out that Singapore is China’s eighth largest trading partner, and that more than 40% of the foreign companies listed on the SGX are Chinese. The Study asserts that the Exchange’s ability to attract Chinese enterprises is what cemented Singapore’s position as a leading financial centre.

Listing on the SGX has in turn enabled these Chinese companies to tap the international capital market, gain international exposure, and operate within a comprehensive and transparent regulatory framework. Ernst & Young adds that the SGX is well-positioned as a springboard into Asia for these companies, thanks to the cultural familiarity and economic cooperation between China and Singapore.

The SGX continues to pursue regional alliances in order to offer a wider network of marketplaces, as in the case of the formation of Asean Exchanges (which Spiking has tackled in a previous post).

Spiking as a Gateway to the SGX

Dedicated to providing investors with up-to-the-minute updates straight from the SGX, Spiking offers a unique perspective of the opportunities provided by the Exchange.

Those who have yet to invest or who are considering investing in the SGX can gain a fairly good grasp of how to invest, and what to invest in simply by using the Spiking app. They will be able to track the top stock spiking along with other trending stocks, as well as follow the trading activities of more than 8,000 top Singaporean investors.

Visit the Spiking app homepage now and discover a new way of exploring a whole world of investment possibilities at the Singapore Exchange.

Photo credit: http://www.aseanexchanges.org/images/pg_theexchanges/xchg_sgx.jpg