Subject: Fw: (BN) Singapore Banker Faces Uphill Battle in Boosting SGX Trading
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Singapore Banker Faces Uphill Battle in Boosting SGX Trading
2015-07-12 16:00:01.1 GMT
By Jonathan Burgos and Chanyaporn Chanjaroen
(Bloomberg) -- When Loh Boon Chye left the board of
Singapore Exchange Ltd. in 2012, equity trading volume on the
city’s bourse had been steadily dwindling for years.
On Tuesday, the veteran Singaporean banker returns to the
exchange’s recently-renovated downtown offices as its new chief
executive. He will soon have to confront an issue that’s more
acute than ever -- in the intervening period, the average daily
value of equities traded kept dropping. Turnover on Singapore’s
bourse in 2015 has been 95 percent lower than in Hong Kong.
Loh will need to summon management skills honed over more
than two decades in international banking to revive the market
and appease Singapore’s brokers, who say SGX’s top executives
neglected domestic equity trading to focus on developing new
derivative contracts.
“They’ve been pushing for the derivatives business because
that’s where the growth is,” said Jimmy Ho, president of the
Society of Remisiers, which represents Singapore’s commission-
based stockbrokers. “They’ve forgotten about the stock
market.”
Share trading in the city has stagnated largely due to the
dearth of new offerings. Only three companies have listed in
Singapore so far this year, at a time when Shanghai and Hong
Kong have seen a flood of initial public offerings.
Investor sentiment has also yet to recover from an
unexplained $6.9 billion plunge in the value of three commodity
companies over three trading days in October 2013, which sapped
confidence in the market. Last month, SGX was reprimanded by the
Monetary Authority of Singapore over two trading outages in 2014
that forced then-CEO Magnus Bocker to make a public apology.
Well Qualified
Those who know Loh from his stints at Deutsche Bank AG and
then Bank of America Corp. say he is well qualified to deal with
the challenges he will face in his new job, even if the task of
reviving local share trading is daunting.
“At SGX, he’ll have a lot of different constituents he’ll
have to deal with, who have different needs and aspirations,”
said Philip Lee, vice chairman of Southeast Asia at Deutsche
Bank. “The ability to have empathy and connect with others will
stand him in good stead. He’s always very calm, he’s never
flustered even in the most demanding situation so he’s therefore
able to make rational decisions.”
Loh’s success in building up Deutsche Bank’s fixed income
business when he was head of Asian global markets between 2002
and 2010 illustrated some of the skills he will bring to
reviving the SGX business, said Mark Leahy, who worked for Loh
as head of Asia debt syndication during much of that period.
Real Talent
“This was his first ‘long ball’ or taking a long term
perspective on the region’s opportunities,” Leahy said.
“Having this perspective is one thing but driving the essential
internal consensus and support for the strategy during hard
times is the real talent.”
With Chinese markets now in turmoil, Loh will need to
decide whether to push ahead with attempts to attract more
listings from mainland companies. SGX in February appointed one
of its most senior executives, Lawrence Wong, to lead
initiatives to build its China business, which lags well behind
the Hong Kong market.
Companies have raised about $8 billion from more than 50
IPOs in Hong Kong so far this year, according to data compiled
by Bloomberg. That, along with the city’s standing as the main
gateway for foreign equity investors into China, helps explain
why $16.4 billion of shares changed hands each day in Hong Kong
on average, compared with $857 million in Singapore.
Derivatives Success
“Our local bourse has lost some of its luster in recent
years, largely because IPO aspirants do not enjoy such favorable
valuations in Singapore,” said Stefanie Yuen Thio, who handles
IPOs and mergers and acquisitions at the Singapore-based legal
firm TSMP Law Corp. “With listings being increasingly regulated
and post-listing compliance costs going up, the argument for
listing in Singapore has become less compelling.”
As well as attempting to revive trading in Singapore
equities, Loh will need to continue to build on the SGX’s recent
success in developing its new derivatives contracts, seen as one
of the major achievements of his predecessor Bocker’s 5 1/2-year
tenure. The most successful contracts are Chinese and Japanese
index futures, used by institutional investors to speculate or
to hedge other positions.
Both SGX and Loh declined to comment on the exchange’s
future strategy.
Derivatives trading accounted for 30 percent of SGX’s
revenue in the year to June 2014, up from 26 percent two years
earlier. The proportion of revenue from equities dropped to 33
percent from 38 percent over the same span. SGX is due to report
its latest full-year results on July 29.
Challenging Business
“The equities business remains challenging,” Julian Chua,
an analyst at Nomura Holdings Inc. in Kuala Lumpur, said by
phone. “They need to get more regional companies to list on
SGX, though companies may not be keen to list at this stage
given the difficult macroeconomic environment.”
Even if Loh manages to revive the IPO business in
Singapore, he still needs to address the lingering concerns over
recent trading scandals, according to the Securities Investors
Association of Singapore, the largest investor lobby group in
Asia. Those include the sudden drop in small commodities stocks
in 2013 as well as debt defaults and accounting irregularities
that saw a number of Chinese companies delisted or suspended
from the SGX.
“Many Singaporeans do not invest in stocks anymore for
fear of losing their money,” David Gerald, president of SIAS,
said by phone. “They fear they would lose their savings so
they’re keeping it in bank deposits even when interest rates are
very low.”
Some doubt that, for all his qualifications, Loh will be
able to overcome this fundamental distrust.
“The public has lost faith,” said Narayanan Narayanan, an
87-year-old retired stockbroker. “It’s going to be difficult
even with a new guy in charge.”
For Related News and Information:
SGX Tallies Cost of Disruptions After Regulator’s Reprimand (3)
Singapore’s Bourse Names Loh Boon Chye CEO, Replacing Bocker (1)
SGX’s Bocker Starts Sixth Year by Saying Sorry: Southeast Asia
Singapore Stocks to Extend Region’s Biggest Rout: Southeast Asia
Top Stocks News: TOPD <GO>
Developed Market View: DMMV <GO>
Feature stories on stocks: TNI STK GREET <GO>
--With assistance from Joyce Koh and Andrea Tan in Singapore and
Darren Boey in Hong Kong.
To contact the reporters on this story:
Jonathan Burgos in Singapore at +65-6212-1156 or
[email protected];
Chanyaporn Chanjaroen in Singapore at +65-6499-2837 or
[email protected]
To contact the editors responsible for this story:
Marcus Wright at +65-6499-2613 or
[email protected];
Sarah McDonald at +61-2-9777-8684 or
[email protected]
Sarah McDonald
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