[SINGAPORE] As tariffs decimate the financials 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.
Macquarie Equity Research on Wednesday (Apr 9) 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 shares have fallen 4.1 per cent, closing 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 two million contracts daily from Monday to Thursday this week. This is compared with a 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 region, 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 is considerably less than its derivatives trading business, Macquarie found, at 27 per cent of total revenue. Bursa Malaysia and the Japan Exchange both make around 60 per cent of their revenue from securities trading, while HKEX rakes in 38 per cent.
The exchange’s securities trading volume had spiked considerably during the week, as Singapore equities lost billions in total value.
However, such temporary surges in securities trading on the bourse would be seen only during such 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 flagged, however, that a sustained retracement in equities or lower volume of equities traded could potentially depress the securities business’s contribution to revenue.
