Singapore Exchange may post a 51% jump in fourth-quarter profit, the fastest growth in six years, as renewed interest in Japanese shares made it the No. 1 venue for trading Nikkei 225 Stock Average futures.
SGX, as the operator of Southeast Asia’s largest stock market is known, will today report net income rose to $92 million in the three months ended June 30 from $61.07 million a year earlier, according to the average estimate by six analysts in a Bloomberg News survey.
Japanese index futures contracts have become Singapore’s most actively traded, as Prime Minister Shinzo Abe’s reforms have spurred equities. Japan’s broader Topix index capped its biggest rally over three quarters in more than 30 years on June 30. The Nikkei 225 jumped 58% from Nov. 14, when elections that brought Abe to power were announced, through the end of June. The coalition led by Abe’s Liberal Democratic Party won a majority of upper house seats in elections this weekend.
“SGX’s derivatives business has been doing well,” Julian Chua, an analyst at Nomura Holdings Inc. in Kuala Lumpur, said in a telephone interview on July 12. “When there was a lot of focus on Japanese equities, the volumes of Nikkei futures picked up as well. Derivatives still has pretty good prospects.”
Derivatives trading volumes jumped to a record in June, led by demand for futures contracts on the Nikkei 225 and the FTSE China A50 Index, the bourse operator said on July 3.
DERIVATIVES GROWTH
The source of profit at the company partly owned by Japan Exchange Group Inc. has shifted from cash-equity trading and initial public offerings to derivatives in the past few years.
Revenue from the cash market declined to $437 million in the year to June 2012 from $450 million in fiscal year 2008, according to data compiled by Bloomberg. During that period, contributions from derivatives trading climbed about 30%.
Average daily derivatives transactions jumped 77% to 556,728 contracts in June, a new monthly record, according to the SGX. The Japanese index futures contracts are the most actively traded in Singapore, followed by those from China, Taiwan and India, the company said.
The derivatives business benefited from a rally in Japanese equities from last November, SGX Chief Financial Officer Chng Lay Chew said in April.
SGX shares gained 0.7% to S$7.54 as of 1:40 p.m. in Singapore, heading for its highest close since May 30. The stock had climbed 6.9% this year through yesterday, compared with a 2.1% advance for the benchmark Straits Times Index.
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