Bringing our global strengths to the fore

SINGAPORE Exchange (SGX) Group has performed in a challenging macroeconomic environment, with abrupt turns in geopolitics and market sentiment. These external conditions are likely to remain fluid and uncertain, but will play to our strengths as a trusted international venue that facilitates capital flows and risk management across multiple asset classes.

As the pace of economic expansion around the world decelerates, Asia remains a bright spot. The region will account for 70 per cent of global growth, with the world’s most populous countries – China and India – contributing to the bulk of it. South-east Asia, with its young, dynamic workforce and burgeoning industries, has also caught the attention of investors.

SGX Group is at the heart of international capital flows to Asia, as the world’s most liquid international marketplace for Asian benchmark equity derivatives, seaborne iron ore and dry-bulk freight derivatives, as well as Asian FX futures.

The choice of jurisdiction matters for investors and market participants. It is akin to Singapore having the most powerful passport in the world. SGX Group is anchored in Asia’s only “AAA”-rated jurisdiction, with globally recognised risk-management and clearing capabilities. This provides our customers with added confidence that they will always have neutral, seamless access to highly liquid and efficient tools.

Ideal springboard for companies

The past year’s monetary-policy tightening by major central banks has added pressure to both debt- and equity-fundraising activities around the world. This has been keenly felt in Asia, with more companies staying private for longer and exercising greater caution on expansion plans outside their home countries. Naturally, stock-market activity has slowed, but it does not diminish our advantage as Asia’s most international marketplace for companies and investors seeking long-term sustainable growth.

We believe it is a matter of time before confidence and demand for liquidity return, as capital gravitates towards Asia and sizeable growth companies emerge in the region. We remain the ideal springboard for companies to expand into the region and access global wealth.

Singapore’s stock market is primed for gradual transformation with the right level of support and participation from public and private stakeholders. At the same time, we are actively enhancing our market-maker and liquidity-provider programmes, while expanding our product suite with new tools that include exchange-traded funds (ETFs), Singapore depository receipts and newly launched structured certificates.

These are building blocks for our marketplaces to remain relevant and vibrant for decades to come.

Sustainable marketplaces

Fulfilling our purpose into the future also involves growing SGX Group in a sustainable manner – being good stewards of the resources entrusted in our care and acting for the benefit of future generations.

Given the size of the global climate challenge, a broad range of transition tools and strategies that progressively support the reduction of carbon footprints is required. With benchmarks being a powerful tool for directing capital to companies on transition pathways, we are making progress to develop targeted solutions.

On the back of our collaboration with MSCI to mobilise private capital to drive climate transition, we have taken the lead to launch the first global suite of derivatives based on the MSCI Climate Action Indexes. This augments our shelf of sustainability-linked derivatives developed with index leaders FTSE Russell and Nikkei, complemented with solutions offered by Scientific Beta and SGX Index Edge. We also continue to work with issuers to expand our suite of sustainability-themed ETFs and green, social, sustainability and sustainability-linked bonds.

Together with our efforts around sustainability reporting and data, and involvement in international net-zero and climate-transition taskforces, we are leading by example and exercising influence in areas that matter.

One trusted ecosystem

We have been pioneering exchange partnerships since the Mutual Offset System with CME, which marked Singapore’s arrival on the global derivatives scene. Fast-forward 40 years and our partnerships have multiplied – our first-of-its-kind NSE IX-SGX Gift Connect, ETF link with Shenzhen Stock Exchange, and upcoming link with Shanghai Stock Exchange, as well as Thailand-Singapore Depository Receipts Linkage.

Through partnerships, we are able to build bridges and connect the world. These strategic corridors function as spokes of liquidity flywheels to attract more participants and capital flows, increasing the scale of the entire ecosystem.

The exchange industry is complex, and the technologies supporting our business and operations are evolving rapidly. SGX Group is exploring and integrating emerging technologies – including artificial intelligence, blockchain, cloud computing and big data – to optimise operations, enhance trading and clearing, and improve workflows. We will adopt new technologies to meet investors’ needs, while enhancing transparency, security and efficiency where they are needed most.

In this fast-changing business landscape, we are confident in our position and are prepared to embrace change to shape the future of our capital markets, guided by our purpose and supported by our people. SGX Group will remain a beacon of trust and innovation in the global financial industry.

Loh Boon Chye is CEO of SGX Group, where Koh Boon Hwee is chairman. This is an abridged version of their letter to shareholders in the 2023 SGX Group annual report.