[SINGAPORE] As tariffs decimate the financial sector, the Singapore Exchange (SGX) is set to position itself as a defensive option with its suite of hedging products, said Macquarie analyst Jayden Vantarakis in a note on Wednesday (Apr 9).
Macquarie Equity Research raised its 12-month target price for SGX to S$13.70 from S$12.90, upgrading the company to “outperform” from “neutral”, noting that the exchange’s derivatives product business stands to benefit from hedging activity during periods of volatility.
The group’s derivative product offerings span equity index futures, foreign exchange and commodity derivatives.
Since the announcement of US President Donald Trump’s slew of tariffs on Apr 2, the exchange’s share price has fallen 4.1 per cent; it closed at S$12.55 on Thursday.
Derivatives trading volume, however, spiked during this week’s global sell-off, driven by hedging activity among traders in Asian markets.
Total derivatives trading volume on the exchange surged to an average of about 2.1 million contracts daily from Monday to Thursday this week. This was higher than the daily average volume of 1.3 million contracts in March 2025, which in turn was up 12 per cent year on year.
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In a report on Monday, the exchange also reported a total derivatives volume of 27.4 million contracts in March 2025, a 14 per cent increase on the year.
Among exchanges in the Asia-Pacific, SGX has the highest share of revenue from derivatives trading, at 40 per cent, Macquarie found. This is compared with 17 per cent for the Hong Kong Exchange (HKEX), 16 per cent for the Australian Securities Exchange, and 15 per cent for Bursa Malaysia.
On expectations of further trading volatility, Macquarie raised SGX’s revenue estimates for the 2025 financial year by 2.3 per cent or S$30 million, to S$1.3 billion. This brought its estimates for SGX’s adjusted net profit after taxes to S$621 million, an increase of S$26 million or 4.3 per cent.
SGX’s share of revenue earned from cash securities trading (at 27 per cent of total revenue) is considerably less than that from its derivatives trading business, Macquarie found. Bursa Malaysia and the Japan Exchange both make around 60 per cent of their revenue from securities trading; at HKEX, the figure is 38 per cent.
The exchange’s securities trading volume spiked considerably during the week, as Singapore equities lost billions in total value.
Such temporary surges in securities trading on the bourse are seen only during volatile periods, the research house said. Conversely, the bourse’s derivatives business shows trends of positive structural growth beyond temporary volatility spikes.
Still, Vantarakis noted that the exchange’s share price, following a recent correction, has not yet priced in the impact of an ongoing market review on its securities trading business. Earlier this year, the review group led by the Monetary Authority of Singapore announced a S$5 billion liquidity injection to boost the bourse’s ailing equities market.
The stock trades at a price of 20 times its estimated FY2025 earnings, compared with global peer exchanges at 23 times.
The analyst added, however, that a sustained retracement in equities or lower volume of equities traded could potentially depress the securities business’s contribution to revenue.
