Singapore Exchange third-quarter profit hits 13-year high as trading volumes surge amid pandemic

By Anshuman Daga and Alun John

SINGAPORE/HONG KONG (Reuters) - Singapore Exchange's profit jumped 38% to a 13-year high in the January-March quarter as extreme market volatility amid the coronavirus outbreak boosted equities and derivatives trading volumes.

Other exchanges are also likely to benefit from the rising volatility, although SGX's strength in derivative products means it is particularly well placed among Asian bourses to do so.

"With uncertainty around the eventual economic and financial impact of COVID-19 and path to recovery, these elevated levels of volatility are likely to be prolonged," Chief Executive Loh Boon Chye said in a statement on Friday.

Net profit for SGX's third quarter rose to S$137.5 million ($96.5 million) from a year earlier. Total revenue rose 29% to S$295.8 million, a record according to Refinitiv data.

The strong results bode well for its main rival in Asia, Hong Kong Exchanges and Clearing (HKEX), which reports January-March results next month and has seen double-digit percentage increases in trading volumes this year.

Its net profit could rise 6.8% to HK$2.8 billion ($360 million), according to an average forecast from two analysts polled by Refinitiv. That would also be a record level for quarterly profit, even if the climb in earnings is less marked than Singapore Exchange's jump.

"There is a tendency for Singapore do to better than Hong Kong in this sort of environment. Hong Kong is very equity focused, while Singapore has a wider and more established range of derivatives products, which will be used for hedging," said Michael Wu, an analyst at Morningstar.

SGX said revenue from currencies and commodities derivatives trading climbed 23%, accounting for 14% of overall revenue, while revenue from equities derivatives trading rose 24% and accounted for 36% of overall revenue.

Citi analyst Robert Kong cautioned in a note that Singapore bourse data so far in April suggested the daily average value of equities securities trading had fallen 37% from March, while derivatives trading had also moderated from record levels seen last month.

"We still prefer SGX over banks but recognize that moderating turnover suggests a less upbeat earnings trajectory going forward," he said. He cut his rating on the stock to 'neutral' from 'buy', saying the shares are "fairly valued post rally".

SGX's shares were down 3% on Friday but are still up more than 10% this year compared with a 22% slump in the main Straits Times index.

($1 = 1.4246 Singapore dollars)

(Reporting by Anshuman Daga and Alun John; Editing by Edwina Gibbs)