Competition for one of SGX’s derivative products is not going to move the needle too much. Some market players may decide to stay with the FTSE A50 Index here, including perhaps mainland Chinese retail or high net worth investors. Of course, the new MSCI futures contract is about China’s stock index futures, and Hong Kong is China’s Special Administrative Region (SAR). And by all accounts, Hong Kong is growing politically closer to China. So the volume may eventually end up in Hong Kong.
The share price for the Singapore Exchange (SGX) fell from a record high of $12.05 attained on Aug 4 to as low as $10.21 on Aug 26, following news that Hong Kong Exchange (HKEX) plans to launch a new MSCI A share index futures contract which is the direct competitor to SGX’s FTSE A50 index.
As The Edge Singapore has pointed out in its Issue 989 in our story Multi-Asset Ambitions, the operating and net profit margins of both SGX and HKEX are hefty, as are their ROE. Exchanges are mainly fee-based businesses and fees are usually viewed as annuity-type returns for investors because of their stability and — as in the case of SGX and HKEX — their growth although both exchanges are taking very different paths to get there.
