Nio and Emperador Secondary Listings Give Local Market a Boost: Is it a Good Time to Buy SGX Now?

SGX

Things are looking up for Singapore Exchange Limited (SGX: S68), or SGX.

The bourse operator is seeing heightened interest from companies looking for a secondary listing.

In early May, electric car manufacturer Nio Inc (SGX: NIO) received the nod for a secondary listing in addition to its primary listing on the New York Stock Exchange.

Nio’s shares surged as much as 20% on its listing debut in late May to hit US$20.

Following Nio’s successful secondary listing, Emperador (SGX: EMI), the Philippines’ largest liquor company, also received its eligibility to list earlier this month.

Emperador’s primary listing venue is the Philippine Stock Exchange and it is the first such company to secondary list on the SGX.

With a pick-up in secondary listings and more interest shown by companies, could it be time to scoop up shares of SGX?

A rise in trading volume

SGX saw robust trading volume for June.

Securities market turnover value for the January to June period came in at S$170 billion, up 13% over the July to December 2021 period (2H2021).

Securities’ daily average volume for the first half of this year was also 19% higher at S$1.39 billion compared to 2H2021.

The two secondary listings should result in higher overall security trading volumes for SGX in the second half of 2022.

More dual listings on the way?

There’s news that more companies may seek secondary listings on SGX to increase their investor exposure and improve trading liquidity for their shares.

Malaysia’s most valuable technology start-up, Carsome Group, was interested in a dual listing in both Singapore and the US.

However, the company announced last month that it had delayed its plans due to worsening economic conditions but could revisit the dual listing when markets improve.

Another Malaysian company, brokerage CGS-CIMB Securities, is also eyeing a dual listing in both Singapore and Malaysia in 2023.

CGS-CIMB has around 2,600 institutional clients and approximately 400,000 retail ones currently and hopes to grow this significantly to five million clients by 2025.

It’s heartening to know that there is a lineup of companies that see SGX as a suitable destination for their listing plans.

More listing aspirants

Meanwhile, CEO Loh Boon Chye is also seeing “increased discussions” with companies that are looking to grow and expand their businesses.

SGX is also seeing increased enquiries and some companies have proceeded to make preparations for a possible listing in the months to come.

He did, however, caution that valuation could be a tricky aspect as stock markets have been gyrating wildly due to concerns over high inflation and rising interest rates.

This news seems to imply that many more companies will proceed with their listing plans once markets stabilise, thereby boosting SGX’s fortunes.

Other growth initiatives

SGX is not just relying on new IPOs or dual listing aspirants to grow its business.

The group recently granted full SGX membership to Futu Singapore, a unit of Futu Holdings Ltd (NASDAQ: FUTU).

Futu’s moomoo investing app is reportedly used by one-fifth of Singapore’s population aged between 20 and 70.

Full membership also includes full trading and clearing for both securities and derivatives.

This recognition could spark higher trading volumes on the exchange.

A stalwart during tough times

SGX has been a stalwart over the last two years by providing stability through challenging times.

The blue-chip bourse operator enjoys a natural monopoly and has been paying out a quarterly dividend of S$0.08 per share since its fiscal 2021.

With an annualised dividend of S$0.32, its shares offer a forward dividend yield of 3.3%.

Get Smart: Better days ahead

It may be just the beginning of the flow of good news for SGX.

As the world recovers from the last two years of the pandemic, more companies can now make plans to grow and expand, thus benefitting the bourse operator.

Volatile conditions may hamper plans for dual listings and IPOs for now, but companies already have SGX on their radar.

When markets stabilise, the group should see a surge in listing activity and also see its securities daily traded volume grow in tandem.

SGX will be reporting its fiscal 2022 results on 18 August before the market opens.

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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited.

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