SGX Analysts' Day 2021 - 11 June 2021 Singapore Exchange - Investor Relations
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SGX Analysts’ Day 2021 11 June 2021 Singapore Exchange
Forward Looking Statements
This presentation may contain forward-looking statements that involve assumptions, risks and uncertainties. Statements in this presentation that are not historical
facts are statements of future expectations with respect to the financial conditions, results of operations and businesses, and related plans and objectives. These
forward-looking statements are based on SGX’s current intentions, plans, expectations, assumptions and views about future events and are subject to risks,
uncertainties and other factors, many of which are outside SGX’s control. Because actual results, performance or events could differ materially from SGX’s current
intentions, plans, expectations, views and assumptions about the future, such forward-looking statements are not, and should not be construed as a representation as
to future performance of SGX. It should be noted that the actual performance of SGX may vary significantly from such statements.
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© Singapore Exchange Limited
2
Agenda
Session One | Strengthening the Core
9.00AM – 9.20AM Taking Our Multi-Asset Business to the Next Level Loh Boon Chye, CEO
9.20AM – 9.50AM Growing Liquidity in Equities Michael Syn, Head of Equities
9.50AM – 10.05AM Enhancing Distribution and Listings Chew Sutat, Head of GSO
10.05AM – 10.30AM Question and Answer Session All
Session Two | Building for Growth
3.30PM – 4.00PM Capitalising on Digitalisation - FX and Fixed Income Lee Beng Hong, Head of FICC
4.00PM – 4.15PM Our Sustainability Values and Priorities Herry Cho, Head of SSF
4.15PM – 4.25PM Solving for Climate Solutions – Scientific Beta Ng Kin Yee, Head of DCI
4.25PM – 4.40PM Financial Goals and Capital Management Ng Yao Loong, CFO
4.40PM – 5.00PM Question and Answer Session All
Closing Loh Boon Chye, CEO
3
Session One
4
Taking Our Multi-Asset Business to the Next Level
Loh Boon Chye, Chief Executive Officer
5
Evolution of SGX
Early days of International Electronification of Asia leads in global
developing investors global markets, growth, climate
Asia seeking Asian growth of passive challenges brought to
opportunities investing fore in a COVID-19 world
EXPAND
DIVERSIFY partnerships,
FACILITATE safe into new asset clients, geographies
MERGE securities and efficient flow of classes, serving and companies A sustainable
and derivatives global capital investing clients end-to-end ecosystem
business for scale in Asia and vice versa facilitating
multiple
SGX Commodities SGX FX
SGX Derivatives SGX Indices points of
SGX Fixed Income SGX Securities access to
growth
6
SGX occupies an investment ‘sweet spot’
Exposure to Asian opportunities combining solid core businesses, exciting
growth engines and emerging opportunities.
1H FY2021 Revenue Growth
FICC
20%
Equities 67%
13%
DCI
FICC and DCI contributed to
33% of revenue in 1HFY2021,
up from 20% in FY2015 Emerging
Stability
7
Creditable performance amid a challenging environment
▪ Revenues grew at a CAGR of ~6% from FY15-20
▪ Medium-term revenue CAGR is expected to rise to high single-digit
▪ Short-term margins could be lower as we invest, but will improve in the medium-term as we scale our
businesses
Revenue
Millions ($)
1,200
6% CAGR
1,000
800
600
1,053
845 910
400 779 818 801
521
200
-
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 1HFY2021
8
SGX’s strategy captures opportunities from macro trends
1 2 3
Widen Grow
Build a
partnerships international
multi-asset
and presence
exchange
networks
Low interest rate Inflation Sustainability and Electronification Growth of Asia leads in
environment concerns climate change of OTC markets passive investing global growth
9
Cyclical trends support multi-asset strategy
Low interest rate environment if inflation remains below target
Average US government bond yields (%)
2.3
2.0 Multi-asset exchange enables investors
1.5
1.2 1.3 to seek incremental returns
0.4
0.2 0.2
0.0 Lower Treasury income
US 12-Month US 2-Year US 10-Year
2011-2015 2016-2021 Current
Source: Bloomberg
Inflation concerns as economies recover from COVID-19 recovery
Monthly US government bond yields (Jan 2020 – May 2021) (%)
2 Volatility in markets
Cyclical recovery for Treasury income
1
Potential risk-off in riskier assets
-
US 12-Month US 10-Year
Source: Bloomberg
10Secular trends driving partnerships and networks
ESG AUM could reach 1/3 of global total by 2025
ESG Global Project AUM by Country (US$ trillion)
60 Europe US Japan Canada Aust/NZ
50 Change is coming to Asia; next wave of
40 growth expected to come from the region
30
ESG transition in Asia lags Europe and US,
20
requires capacity and ecosystem building
10
0
2014 2016 2018 2020 2022 2024
Source: ESG assets may hit $53 trillion by 2025, a third of global AUM, 23 February 2021, Bloomberg
Growing demand for digitalisation in trading and workflow solutions in OTC FX and Fixed Income
Electronification in asset classes (2020) (%)
Builds on SGX’s position as largest Asia FX
80% exchange and leading APAC bond listing venue
60%
40%
20% Competition from peers, slower than
0% anticipated adoption
US IG Corporate US Treasuries FX US Cash Equities
Bonds
Source: Oliver Wyman
11Secular trends driving partnerships and networks
Passive investing trend to grow
Assets under management (US$ trillion)
15
10 Increased demand in index products for
trading and benchmarking
5
Impact on Singapore equities market, with
0
its smaller weight
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Global passive assets hit $15tn as ETF boom heats up, 10 May 2021, Financial Times
Asia continues to lead global growth in COVID-19 recovery
GDP Growth Forecast for 2022 (%)
Product suite covers close to 100% of Asia's GDP
6.0%
4.4%
3.5% 3.8% Demonstrable strength of ecosystems and
networks in Asia
Increased competition from peers seeking to
World United States Euro Area Emerging and provide Asian access
Developing Asia
Source: World Economic Outlook April 2021, IMF
12Asia is the new epicentre of international expansion
Broad waterfront covering close to 100% of Asia’s GDP Widening global footprint
Singapore
Equities
China
FX
China Japan
Korea FX International
Equities Offices
Japan FX Hong Kong India
Bonds
Equities United Kingdom United States
Taiwan
Equities FX
India
FX
Singapore
Subsidiaries
Equities United Kingdom France
ASEAN
FX
Pan Asian Commodities
Steel value chain T+1 volume (% of total volume)
Asia’s most global and diversified listing venue Rubber
> 40% foreign listed companies 18%
Global Freight 14%
> 80% foreign listed bonds
Petrochemicals
2018 2020
13SGX Group – Acquire, Partner, Build
Independent index provider specialising in Smart Beta Leading cloud-based Multi Dealer liquidity platform
strategies and with a highly regarded research pedigree in G10 and non-G10 currencies
ECN
Pan-Asian electronic bond trading platform powered by OTC FX electronic communications network (ECN) anchored
advanced technology and rich analytics in Singapore towards an Integrated FX Offering combining
FX Futures and OTC FX offering
Global carbon exchange and marketplace that aims to Asia Pacific’s first exchange-led digital asset venture focused
scale the voluntary carbon market on capital markets workflows through smart contracts,
ledger and tokenisation technologies
14Acquisition considerations and principles
Considerations General Guiding Principles
▪ Gain capabilities to augment current offering
Strategic Fit ▪ Expand and deepen client relationships
▪ Position SGX for fast growing business segments
▪ 3-year pro forma revenue CAGR > 10%
▪ Cash EPS accretive within 3 years of acquisition
Financial Metrics
▪ IRR > SGX’s WACC
▪ Key synergies to be fully realized within 3 years of acquisition
Capital Structure ▪ Maintain SGX's strong implied investment grade rating
Partnerships ▪ Majority stake preferred
15Growing Liquidity in Equities
Michael Syn, Head of Equities
16Equities platform
Vertically and Horizontally Integrated
1 • Bind the Futures and Securities verticals
• Drive network effects and portfolio effects
Stronger and Faster Spotlight today
2 • Quick time to market
• Strong ecosystem support, because of strong • FTSE liquidity switch
alignment of needs and purpose
• MSCI Singapore
• ETFs
3 Platform strategy
• Covid drove B2C digitalisation • ESG shelf
• Constantly make reinforcing choices for ecosystem
4 Shelf strategy
• First productise, then electronify
• Asian timezone price formation
17FTSE : Successful execution of the world’s first liquidity switch
Powerful network effects and portfolio effects : SGX platform, clients and intermediaries
TW vs TWN Open Interest (US$M) ID vsMSCI
SGX FID Open Interest (US$M)
SGX FTSE
SGX MSCI SGX FTSE
TW Notional
Taiwan
TWN Notional
Taiwan Indonesia
ID Notional
Indonesia
FID Notional
12,000
Index Futures Index Futures 40 Index Futures Index Futures
35
10,000
Notional OI (US$M)
30
Notional OI (US$M)
8,000
25
6,000 20
15
4,000
10
2,000
5
0 0
18Transformation of Singapore composites
Globally-listed Singaporean companies to be included in MSCI Singapore
New Economy will have major weight in MSCI Singapore
50
▪ Collaboration with MSCI/FTSE
➢ Maximise runway and impact for the only liquid Asian
40
MSCI derivatives
Index Weighting (%)
30 ➢ Broad buyside consultation for gradually paced inclusion
➢ STI and SiMSCI cover the bases
20
▪ Following A-share inclusion path
10
➢ Natural ‘homecoming’ for Asian price formation
➢ Singapore increases weight in Asia ex-Japan allocation
0
▪ SiMSCI is liquid from Asia to US session
➢ Highly tradeable, ESG friendly, developed market
SiMSCI STI SiMSCI + New Economy ➢ Index will be higher volatility, growth oriented
19Record year for ETFs, with AUM crossing S$8 Billion
ETFs AUM surged to S$8.6B, turnover jumped 2.5 times Record growth in ETF holders in 2020
57% 2.5 times • New ETF listings
• Broker, wealth and robo-campaigns
STI ETFs crossed S$2 Billion, boosted by retail demand Fixed Income ETFs AUM doubled to S$4 billion
Gold ETFs
SGD $1.52 bn Equities ex-Reits ETFs
18% SGD $2.64 bn
31%
3%
43%
Equities ex-Reits ETFs
Reits ETFs
Fixed Income ETFs
Gold ETFs
123%
Reits ETFs
Fixed Income ETFs $0.47 bn 21%
SGD $3.96 bn 5%
46%
20Risk-management solutions for ESG portfolios
Launch of 4 new ESG Equity Futures on 25 January 2021
SGX Product Features
❶ Global Emerging Markets
▪ Seamless integration into existing portfolios
▪ High correlation with Asian benchmark indices
❷ Emerging Markets Asia ▪ Improved ESG profile
▪ Backed by top pension funds and aligned with UN Sustainable
Development Goals
❸ Asia ex Japan
▪ Stock weights are tilted in favour of companies that
demonstrate strong ESG practices whilst decreasing exposure
to companies that do not
❹ ‘Blossom’ Japan
▪ Blossom Japan is a leadership product that only include the
highest rated ESG companies
Continuous screen prices for Blossom Japan Futures
Correlation ‘Blossom’ Japan FTSE Japan Topix ~16% reduction in
carbon emissions during the T session
FTSE Japan 99.6% intensity versus Average TOB of ~US$2.7M and Spread of ~22bps
Topix 99.3% 99.9% FTSE Japan index
Nikkei 96.7% 96.6% 95.8% 4 30
3
20
2
Correlation FTSE EM ESG FTSE EM ~19% reduction in 10
FTSE EM 99.8% 1
carbon emissions
MSCI EM 99.6% 99.6% intensity versus 0 0
FTSE Emerging 0800h 0900h 1000h 1100h 1200h 1300h 1400h
Markets Index Average of Top-of-Book Size (Notional US$M) - LHS
Average of Spread (bps) - RHS
*Correlation of weekly returns over a 1y period Source: Bloomberg
21Enhancing Distribution and Listings
Chew Sutat, Head of Global Sales and Origination
22An enduring capital market performance supports SDAV
▪ Primary and secondary fundraise grew $6bn in FY19 to $10bn in FY21 (CAGR ̃28%)
▪ Secondary fundraise from REITs posted a CAGR of 24% from $4B in FY19 to $6B in FY21 – 2X SDAV Impact vs Mkt Cap
Attractive and Enduring Capital Raising Market FY21 MB Post IPO Performance
420
10
400 Nanofilm +112% TOV: 155%
380
360 6 9 Credit Bureau Asia +66% TOV: 124%
394
340
320 342 342 G.H.Y Media +28% TOV: 122%
300
FY19 FY20 FY21
Debt Listing Fund Raised ($bn)* Equity Funds Raised ($bn)** Aztech Global +19% TOV: 773%
20 $11,000
16 $10,000 (in SGD mn) $0 $1,000 $2,000 $3,000 $4,000
$9,000
15 Listing Market Cap Peak Market Cap
$8,000
$7,000
$6,000
10 Widening IPO Geographical Reach Over The Years
$5,000
$4,000
5 5 5 5 $3,000
5 42% 36% 50%
4
$2,000
$1,000
0 $0
FY19 FY20 FY21 (in SGD mn) FY16-17 FY18-19 FY20-21
Mainboard IPO Catalist IPO SG Companies Intl. Companies
MB Listing Market Cap MB Listing Market Cap (excl. REITs)
Pri + Sec Fundraise^ REIT Sec Fundraise
^ FY20 secondary fundraise excludes the $8.8 billion rights issue from Singapore Airlines
*Bond Listing data exclude Fannie. FY21 number is on annualized basis ** Primary + Secondary Fund Raised 23Capital raising activities - New growth drivers
Recovery of Global REIT Market
▪ Improving and stabilising global REIT market. Healthy pipeline of potential listings across diverse sectors and global
geography.
▪ Global REITs turned around an 8% median decline in 2020 to an 8% gain in 2021 (S-REITs at 6% median gains)
Secondary Listings of Unicorns from the US
Global liquidity venue for Global Asian / South East Asian companies:
• Nasdaq partnership (including Regulatory), and Regulatory precedents established
• Cross border full fungibility with DTCC; support by market makers
• Market infrastructure and processes in place
Asian SPACs venue for fund Raising
▪ Broaden alternative pathways in the public market and investor choices with SPACs gaining traction in major markets
due to speed to market and ability to offer price certainty in valuing target companies
✓ Engaged substantial numbers of Investors, Financial Institutions and asset owners (PEs and VCs) on the public consult
✓ Positive industry feedback; key to balance quality with market-friendly features tailored to the region
24International distribution
Ten Offices in Singapore, New York, Chicago, San Francisco, London, Tokyo, Hong Kong, Beijing, Shanghai and Mumbai
▪ International HQ for Buy/Sell side
institutional customers & Commodities / FX
specialist trading firms
▪ Corporate access for SGX Listcos
▪ DCI sales and connectivity solutions
▪ Baltic, BidFX and Scientific Beta
▪ Remote Members
▪ Beijing: ECM/DCM origination
▪ Shanghai: commodities, FX and equity ▪ US HQ for PTG’s, Banks Corporate
derivatives Corporate Access for Listcos access for SGX Listcos,
▪ Equity Commodities and FX Derivatives
▪ Baltic ▪ DCM/ECM liaison support
▪ Corporate Access for SGX Listcos
▪ BidFX & Scientific Beta ▪ DCI sales and connectivity solutions
▪ BidFX and Scientific Beta
▪ Fixed income, cash ▪ Equity Derivatives & FX,
equities & ▪ Asian HQ for Bank Trading & Buy Side.
commodities ▪ Corporate Access for Listcos. Origination
▪ Baltic ▪ BidFX, XinTru
▪ Remote Members
▪ ECM & DCM, and Corporate Coverage Specialist teams
▪ Hub for rest of Asia (Taiwan, Australia, South East Asia, UAE, Israel)
▪ Global market maker & liquidity providers management
▪ Supports on-shoring of global clients acquired in the field
25Multi asset growth through international distribution
Build a multi-asset exchange Grow international presence Expand network and partnerships
✓ Acquire new clients in new markets
✓ Increase penetration by cross-selling new asset classes & products (including Cash market)
✓ International clients across all regions contributed to > 40 new products launches and > 10 open interest and product
reactivation/market structure improvement initiatives
✓ Average number of products traded by our top 30 clients rose by more than 30% over a period of 5 years
FTSE Taiwan Migration FTSE Vietnam Creation Iron Ore Financialisation SGX Currencies
✓ Successful migration of bulk of ✓ Supported TW Client Fubon to list ✓ Screen volumes average >12.5k ✓ Dominant market share for flagship
MSCI TW benchmark futures a $350mn Vietnam ETF lots/day and grew to 20% of total products + new client opportunities
product to new FTSE TW index futures volumes in FY21 through Bid FX clients
✓ Enabled five market makers
✓ Dominant liquidity and open providing liquidity for risk ✓ Average daily notional traded ✓ Average daily volume for USD/CNH at
interest supported by management for new FTSE value of $1.5bn in FY21 US$4bn, with market share at >80%.
international customers globally Vietnam product Month-end open interest at US$9bn.
✓ Participant mix including China,
✓ Market ready for new UK, and US financial (non ✓ Average daily volume for INR/USD at
international participants physical) clients US$2bn, with market share at >70%.
Month-end open interest at US$1bn.
✓ New currencies pairs enabled
through onboarded market makers
26Increasing connectivity and flow from China
Membership: 20 leading trading and clearing members to date. Increasing, Chinese asset management firms and
financial services companies are setting up companies in Singapore as Asian/ASEAN Hub
• Haitong International (DC and CDP Membership) New
• HGNH International Financial (DT and DC Membership)
• Orient Futures International (DT and DC Membership)
• CICC (ST Membership) ) New
• CGS-CIMB Securities (ST, CDP, DT and DC Membership)
• Yongan International (DT Membership)
• Zhongda Futures (Remote DT Membership) New
• TFI Securities and Futures (Remote DT Membership) New
• Futu Securities International (ST and DT Membership)
• GF Futures (DT Membership)
• Citic Futures International (DT Membership)
• China Xin Yongan Futures (DT Membership)
• China Tonghai Securities (DT Membership)
Agricultural Development Bank of China and China Development Bank (CDB) listed offshore bonds in October 2020. CDB
Fixed Income
listed the first China onshore RMB bond worth US$6.48bn on December 2020 and the first onshore green bond.
Securities SGX markets added to Chinese Broker Apps. World’s largest Chinese pure government bond ETF listed in Singapore in
Trading September 2020 (WGBI Inclusion)
Equities First VIE structure company, G.H.Y Culture & Media, listed on December 2020 adding to 74 Chinese Listcos
MOU CICC, Citic Securities, Guangfa Securities, CFETS, China Central Depository and Clearing and Guotai Junan established, with
Partnerships BOC and ICBC as settlement banks
27Question and Answer Session
28Session Two
29Capitalising on Digitalisation - FX and Fixed Income
Lee Beng Hong, Head of Fixed Income, Currencies & Commodities
30FICC priorities aligns to trends transforming Asian capital markets
Trends Actions in FY21 Continued focus on
Greater electronification,
Digitalisation and use of DLT
Platforms
Asia leads global growth;
internationalisation of China
Strategic
partnerships
31An Integrated FX Marketplace
32OTC FX is a fast growing and sizeable market; SG is
leading Asian FX hub
Global OTC FX is fast growing and sizeable market 29% of Global FX market at $1.8 trillion addressable for
ADV, US$ trillion FX market infrastructures
+9% 6.6 Market share of FX trading – Electronic versus Voice, %
2016
5.3 5.1 +6% 33 2019
29 28 27 27
3.9 23
3.3
15 13
1.9
2 3
Electronic Electronic Voice Voice Others
2004 2007 2010 2013 2016 2019 (MDP, ECN) (SDP) (Direct) (Indirect)
Asian FX growing much faster Vs G8 currencies Singapore well - positioned as a leading Asian FX Hub
G8 Asian (exclude JPY) Major FX players to set up SG infrastructure - 14 SG ranking as a
ADV, US$ billion ADV, US$ billion leading Financial Institutions participated till date FX Hub
6000 +6% 900
5000
800 +10% 1st
700
4000 in APAC
600
3000
500
2000 400 3rd
1000 300
in Global
0 200
2007 2010 2013 2016 2019 2007 2010 2013 2016 2019
1 Source: BIS Quarterly SDP – Single Dealer Platform
Review, December 2019 – Graph 2
MDP – Multi Dealer Platform
2. MAS website: https://www.mas.gov.sg/development/foreign-exchange 33
ECN - Electronic Communication NetworkSGX is pursuing three distinct FX opportunities
FX Futures OTC FX
A FX EXCHANGE B MULTI DEALER PLATFORM C ELECTRONIC
(“MDP”) COMMUNICATION NETWORK
(“ECN”)
Marketplace Workflow Solution Marketplace
Connecting ALL investors to Connecting buy-side to many Connecting ALL Institutional
trade FX Futures & Options sell-side for trading OTC FX firms to trade OTC FX based on
based on best available bid- on a ‘disclosed’ basis best available bid-ask quotes
ask quotes from multiple from multiple market
market participants participants
Anonymous Disclosed Anonymous
Addressable Market Addressable Market Addressable Market
ADV: 160 Bn ADV: 850 Bn ADV: 1,000 Bn
ALL TO ALL Dealer to Client ALL TO ALL
Launching
Soon
34Three-pronged strategy to build an integrated and
scalable FX platform
FX Futures OTC FX
A FX EXCHANGE B MULTI DEALER PLATFORM C ELECTRONIC
(“MDP”) COMMUNICATION NETWORK
(“ECN”)
1 Pivot from FX Futures to OTC FX (MDP) – Acquisition of BidFX
2 Setup an OTC FX (ECN) anchored in Singapore
3 Build an Integrated FX Offering combining FX Futures and OTC FX offering
Operating
Synergies across FX
Transaction Leverage: Cloud Scalable FX
platforms and SGX
based Revenues based SaaS Platform
eco-system
Platform
35Asia’s Digital End-to-end Fixed Income Offering
36Opportunities for market infrastructure to
provide an Integrated E2E fixed income offering
A Primary Markets B Secondary Markets C Post-Trade D Data & Analytics
1. APAC G3 Corporate Bonds is a sizeable opportunity - USD$2.8 trillion1 of bonds outstanding
2. Electronification, Digitalization
3. DLT and Digital Assets
4. Sustainable Finance
Integrated End 2 End Fixed Income Offering
1. Source: ICMA Group - https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/Secondary-Markets/bond-market-
size/#APAC%20G3%20Corporate%20Bonds 37SGX to capture these market opportunities by offering
four key propositions
A Primary Markets B Secondary Markets C Post-Trade D Data & Analytics
One Stop Primary Leading Asian Bond Asia’s Leading Post Trade Provide Sustainability
Issuance Platform Trading Platform Infrastructure Finance & Reporting
• Further strengthen • Enhance liquidity and • Strengthen post-trade • East-West data
SGX’s position as Asia’s execution in the Asian connectivity with global partnership with Nasdaq
leading bond listing bond market for global CSDs / ICSDs to provide on NSBN (Nasdaq
venue clients Singapore based Sustainable Bond
settlement Network)
• Digitalization of bond • Expand suite of China
issuance processes fixed income access • DLT/smart contracts for • Green, Social,
products bond settlement Sustainability Fixed
Income Securities
Joint Ventures Partnerships
Digital End 2 End Fixed Income Offering
38MarketNode (JV with Temasek) – Primary Issuance
Platform
A Primary Markets B Secondary Markets C Post-Trade D Data & Analytics
Platform partners Primary Issuances of Bonds
Issuer Services platform
Bond Issuance platform(s)
Bond Listing
Settlement
banks/SWIFT CDP,
CSDs
Networks and
Central Ledger ICSDs
Custodian banks
39TrumidXT – Asian Bond Trading Platform
A Primary Markets B Secondary Markets C Post-Trade D Data & Analytics
A Joint Venture between:
1. Why JV? 2. Why will the JV succeed? 3. What is JV’s vision?
• Growth in Asian Fixed Income • Trumid’s cutting edge • Asia’s first regional bond
technology trading platform anchored
• Internationalization of Bond out of Singapore
markets in Asia • Power network of combined
client base and connectivity • ‘East-West’ corridor giving
• Greater shift towards to eco-system global Institutional investors
Electronification access to Asian bonds
• Deep experience and proven
track record
40Summary
Our Focus
• Accelerate electronification/digitalization of Asian FX and Fixed Income market via
➢ Integrated FX markets across futures/OTC
➢ End-to-End Digital Fixed Income service offering
Key Success Factors
Leading & Trusted Joint Ventures & ‘One-stop’ shop
Synergies across Multi-Asset
Market Strategic for all products &
portfolios Exchange
Infrastructure partnerships services
41Our Sustainability Values and Priorities
Herry Cho, Head of Sustainability and Sustainable Finance
42Our vision: A leading capital and trading hub enabling sustainable
finance and credible transitions with end-to-end products, solutions
and ecosystem
Be a positive influence and foster collaboration and partnerships to provide data, tools,
In the Ecosystem resources and connecting stakeholders to drive industry discussions.
As a Company As a Business As a Regulator
Demonstrate leadership in Offer ESG solutions and support Guide market on sustainability-
sustainability e.g. SGX as a capitalizing on our assets, related disclosures and ensure
company will adopt TCFD from expertise and capabilities: that all investors are able to
FY2021 reporting, currently ▪ Equity access decision-relevant data.
setting science based targets for ▪ GSSS Bonds
GHG emissions. ▪ Indices (incl. Scientific Beta)
▪ Commodities (incl. Baltic
Exchange, HeveaConnect)
▪ New horizon projects (Climate
Impact X, new products)
43Where are we today? 10 years in the making
2009: Published SGX’s own first Launched Climate Impact X
sustainability report
▪ Launched decarbonisation and transition opinion guide
2013: First Green Bond Listing
▪ GRI ASEAN hub partner Scientific Beta launched Climate Impact
2016: Joined UN Sustainable Stock Exchanges ▪ Knowledge Partner to Asia Sustainable Finance Consistent Indices
initiative Initiative (ASFI)
Launch of ESG Derivatives
2016: TCFD Vice Chair appointment ▪ Launched low-sulphur fuel oil (LSFO) derivative
contract
2016: Launched iEdge ESG indices
▪ Co-developed Maritime Sustainability Reporting ▪ Second sustainability report review with NUS-CGS
2010: Issued Policy Statement on Sustainability
Reporting Guide
▪ Joint study with KPMG & NUS-CGS: "Perspectives of
▪ Inaugural sustainability reporting review with Financial Institutions on Sustainability Disclosures“
2016: Introduced Sustainability
Reporting requirements CGIO and NUS-CGS
▪ SGX-NUS Case Competition: Carbon Credits
2018 2020
2009 -17 2019 2021
▪ Hosted ASEAN Conference on TCFD Launched SGX’s FIRST platform ▪ Awarded Asia’s Best Sustainability Report
Recommendations award at the 5th Asia Sustainability
Reporting Awards 2020
▪ Launched world’s first high-grade iron ore
RECs market offerings launch EMC ▪
derivatives Became a signatory of the UN Global
Compact
▪ Published Investor Guide to Reading Sustainability
Reports ▪ NASDAQ NSBN – Exclusive Asia Pacific partner ▪ Recognised on Bloomberg's Gender-Equality
Index
▪ SGX-NUS Case Competition: Sustainable ▪ Baltic Exchange Issued “non-scrubber fitted”
benchmark vessel alongside IMO2020 ▪ Launched low-sulphur fuel oil (LSFO)
Investments
implementation derivative contract
▪ Launched e-learning modules on
Sustainability Reporting
44Multi-pronged lead, futureproof and build with sustainable initiatives
Example for climate action, a priority theme 1. Holistic partner during every stage of
transition
▪ Overarching guide for senior corporate
leaders & corporate sustainability
practitioners
▪ FIRST platform: Content & support for
companies, investors e.g. courses and
Decarbonisation and transition journey workshops, knowledge center
2. During rapid emissions reduction: financing
▪ Green, sustainability, transition,
sustainability linked bonds to help finance
capex e.g. more energy efficient facilities,
renewable energy
▪ Hedge via ESG equity and greener
commodities derivatives
45Multi-pronged lead, futureproof and build with sustainable initiatives
(cont’d)
Example for climate action, a priority theme 3. Compensating for remaining unabated
emissions
▪ High quality carbon credits
4. Disclosure and transparency
▪ Disclosure standards for listcos, particular
focus on climate
▪ Indices: Scientific Beta’s CICI offering
Decarbonisation and transition journey ▪ ESG ratings available on FIRST, WIP ESG
data portal for equities and fixed income
▪ WIP: Green, climate alignment/resilience
methodology, products and platforms
46Growing sustainable and credible transition products and solutions
SGX FIRST: Future In Reshaping Sustainability Together
Fixed Income Equities Indices Commodities Equity derivatives
▪ #1 Green Bond Listing ▪ Provision of ESG ▪ Strong thematic and ▪ Climate Impact X: ▪ Complete ESG Futures
Venue in Asia with Ratings of Listcos proprietary carbon exchange and shelf in regional
50% market share of ▪ Vice-Chair of TCFD & capabilities market place derivatives
Asian Issuances in the future guidance ▪ Greener commodities - SGX FTSE Emerging
last 12 months ▪ ESG screening and low contracts – 65% Iron ESG Index Futures
▪ Top 5 Green Bonds ▪ WIP: Key reporting carbon/ESG/climate Ore futures, IMO- - SGX FTSE Emerging
marketplace globally indicators tool, risk filters compliant Low Sulphur Asia ESG Index
with 8% share market further productisation - Scientific Beta ESG Fuel Oil (LSFO) futures Futures
share on climate, green and & Climate Impact and Methanol - SGX FTSE Asia ex
ESG Consistent Index derivatives Japan ESG Index
▪ WIP: Database and (CICI) ▪ RECs market offerings Futures
digitalization, support - iEdge SG ESG as part of the - SGX FTSE Blossom
for sustainability Leaders Index PowerSelect platform Japan Index Futures
linked & transition - iEdge SG ESG ▪ Baltic Exchange:
bonds Transparency Index Low Sulphur route
pricing supporting IMO
2020 agenda
▪ HeveaConnect
47FIRST: our platform to catalyse change
sgx.com/first
48Solving for Climate Solutions – Scientific Beta
Ng Kin Yee, Head of Data, Connectivity and Indices
49Scientific Beta’s New Pillar of Growth
Adding ESG/Climate solutions to Smart Beta Pillar
▪ Set up in 2012 to transfer the results of its research in the area of equity portfolio construction
and risk control to the industry in the form of transparent and low-cost strategies.
▪ Developed two types of expertise that correspond to two major concerns for investors:
− Smart beta, and more particularly factor investing.
− ESG, and particularly climate investing.
▪ Since acquisition, accelerated investments in the area
of climate investing as part of the SGX Sustainable
Exchange strategy.
▪ Devoting more than 40% of its R&D investment to climate investing and more than 45% of its
assets under replication refer to indices with an ESG or climate flavour.
▪ EDHEC and Scientific Beta have set up a EUR 1 million/year ESG Research Chair at EDHEC Business
School.
50Climate Investing
Fast Growing industry that Is Evolving Scientific Beta is developing three types of expertise
▪ Greenwashing risks in current solutions in the area of climate investing:
▪ Data quality challenges
▪ New private sector initiatives and regulations, − Portfolio construction capabilities that are
e.g. taxonomy, disclosures, etc genuinely consistent with the investor’s
climate objectives.
Cumulative number of policy interventions globally per year
Source: PRI responsible investment regulation database
− Expertise on the qualification and proper
usage of climate data, which is a first-order
subject for the relevance and prevention of
the risks of greenwashing.
− A capacity to develop new sources of
information to improve climate investing
(notably climate alignment and climate risk
exposure data).
51Climate Solutions Need Evolution
Key challenges with current benchmarks:
Current practice Implications
1 Mix financial metrics with climate considerations, Companies with worsening rate of
leading to misaligned stock weights. decarbonisation can have increased weights.
2 Avoid sectors key to economic growth and Under-represented sectors will be under-
transition (e.g. electricity) due to their high funded for transition.
carbon intensity.
3 Use unverifiable Scope 3 emissions data, where Unreliable variances in stock-level data
there is limited convergence amongst different amalgamated at index level.
data providers.
52Scientific Beta ESG and Climate Solutions
Existing offerings for Multifactor indices Launched April 2021
53Climate Impact Consistent Index
Delivering Asset Owners Net-Zero Goals
Pure Climate Index Decarbonisation Data
Stock weightage depends on climate 7% carbon intensity annual self-reduction Appropriate use of data and
performance Anti-greenwashing constraint: metrics to guarantee the climate
Decarbonisation consistent to stock level robustness of the portfolio
Does not mix financial and non-
financial objectives Rewards SBTi and Green revenues
Preserves key economic sectors Investibility
Real representation of all sectors in the Good level of Investibility, even though it is
economy and avoiding greenwashing by not anchored on cap weights
excluding critical sectors
54Financial Goals and Capital Management
Ng Yao Loong, Chief Financial Officer
55CFO Priorities
Operating Capital Shareholder
leverage management returns
Revenue Growth Balance Sheet Sustainable Dividends
Cost Discipline Capital Allocation Value Creation
56Delivering Revenue Growth
Revenue
1,200 6% CAGR
Millions ($)
1,000
▪ Revenue growth of 6% CAGR
800
historically.
600
1,053 ▪ Medium term Revenue CAGR1 of high
400 779
200
single-digit.
0
FY2015 FY2020
▪ In the medium term, our revenue mix is
19% ~25% anticipated to be FICC 25%, Equities 60%
and DCI 15%.
1H Medium-
14% ▪ Contribution from Scientific Beta and
FY2021 ~60%
Term BidFX revenues will grow beyond their
67% ~15% current 6%.
FICC DCI Equities
72%
1 Growth outlook assumes stable market backdrop.
57Maintaining Cost Discipline
600 Expenses
Millions ($)
5% CAGR ▪ Total expenses for current FY likely to
500 be below our expense guidance of
$535M-545M.
400
▪ Expense growth of 5% CAGR
historically.
300
4871 ▪ Investment in growth of our business
200 may lead to higher expense growth in
377
the short term.
100 ▪ Medium term expense CAGR to be
~mid-single digit.
0
FY2015 FY2020
1 Excluding Scientific Beta, FY2020 expenses were $475M.
58Revenue Growth and Cost Discipline contributing to
Operating Leverage
▪ Investment in faster-growing businesses may have an impact on our margins in the short term.
▪ In the medium term, EBITDA and Operating margins expected to be comparable to FY2020 levels,
which were heightened by pandemic-related volatility and trading activity.
EBITDA margin Operating profit margin
62% 62%
54%
58% 58% 52%
57%
51%
50% 50%
FY17 FY18 FY19 FY20 1H FY21 Medium Term FY17 FY18 FY19 FY20 1H FY21 Medium Term
59Continued Growth in Derivatives Trading & Clearing Revenue
▪ Treasury income in FY2021 is expected to be lower y-o-y mainly due to a declining rate environment, which is
cyclical.
▪ Continue to focus efforts on growing our core business and capturing exciting growth and emerging opportunities.
▪ Excluding Treasury Income, SGX’s derivatives revenue has been growing at 7% CAGR in the last 5 years.
Derivatives Revenue, Treasury Income and USD 12M LIBOR
800
Millions ($)
2.76%
2.18%
1.74%
700 1.23%
0.55%
0.34%
600
Derivatives Trading and Clearing Revenue
CAGR: 7%
500 455
400
400 135
291 290 108
300 265
49 53 228
44
200 46
292 320
100 241 221 237
182
-
FY2016 FY2017 FY2018 FY2019 FY2020 1H FY20211
Derivatives Trading and Clearing revenue Treasury Income USD 12mth LIBOR at period end
Source: SGX, Bloomberg
1Licence fee is bundled into Trading and clearing revenue from 1H FY2021 onwards 60Capital Management – Our Framework
Balance Sheet ▪ More efficient balance sheet management while maintaining
Management financial flexibility
Efficient ▪ Deployment of free cash flow towards growth initiatives,
Capital Allocation investments and resilience
61Managing our Balance Sheet
▪ Strong balance sheet with capacity to leverage for acquisitions, while maintaining ratios equivalent to a
strong implied investment grade rating.
▪ Available options to diversify capital sources and optimize cost of capital e.g. maiden EUR240M
convertible bond issuance in Feb 2021.
Leverage Ratios and Credit Ratings
S&P: BBB+
5 Moody’s: A3
S&P: A S&P: BBB
Moody’s: A3 Moody’s: Baa2 4.4
3.9 3.9
Gross debt / EBITDA ratio (x)
4
3
S&P: AA
S&P: AA-
Moody’s: Aa3 1.9
2
1.3
1 0.8
S&P:AA- 0.6
0.2
0
0
Peer #1 Peer #2 Peer #3 SGX Peer #4 Peer #5 Peer #61 Peer #7 Peer #8
Source: Bloomberg, SGX
Note: Peers include ASX, CME, DB, HKEX, ICE, JPX, LSE, NASDAQ at 31 December 2020. Ratings relate to S&P and Moody’s Credit ratings, where applicable.
1 Pro forma taking into account acquisitions/divestments.
62Allocating our Capital
▪ We remain committed to rewarding our shareholders and investing in growth and resilience.
▪ Capital expenditure for FY2021 is expected to be just below our guidance of $55M to $60M.
Investments in resilience, Investments in resilience, modernisation of system
modernisation of system
architecture and digitalisation
architecture and digitalisation
▪ Technology CAPEX for SGX core platforms
Investments in growth
Investments in growth
▪ Investments in our FX and FI businesses
FCF1 ▪ Partnerships and acquisitions
Dividends
Dividends ▪ Continue to pay sustainable and growing dividends
1 Free Cash Flow (FCF) defined as Net Income adjusted for non-cash expenses
63Delivering Total Shareholder Returns
▪ SGX has returned over $3B in dividends and raised dividends thrice over the past 10 years.
▪ EPS growth of 6% CAGR historically.
Dividend per share (cents) Earnings per share (cents)
32.0 CAGR: 6% 44.1
30.5
30.0 30.0
28.0 28.0 28.0 28.0 28.0 36.5
27.0
33.9
32.6 32.6
31.7
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY211 FY15 FY16 FY17 FY18 FY19 FY20
1Annualised based on dividends paid in the first 3 quarters of FY2021. Q4 FY2021 dividend has yet to be announced and is subject
to approval by shareholders at the AGM. 64Question and Answer Session
65Closing
Loh Boon Chye, Chief Executive Officer
66Thank You SGX Investor Relations Contact: Dominic Lim, Head of Investor Relations Joyce Koh, Associate Director, Investor Relations Tel: (65) 6236 5395, Email: dominic.lim@sgx.com Tel: (65) 6236 8356, Email: joyce.koh@sgx.com Singapore Exchange Beijing Hong Kong London Mumbai New York San Francisco Shanghai Tokyo Chicago sgx.com This material is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Singapore Exchange Limited (“SGX”) and/or its affiliates (collectively with SGX, the “SGX Group Companies”) to any registration or licensing requirement. This material is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This material has been published for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Use of and/or reliance on this material is entirely at the reader’s own risk. Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Any forecast, prediction or projection in this material is not necessarily indicative of the future or likely performance of the product. Examples (if any) provided are for illustrative purposes only. While each of the SGX Group Companies have taken reasonable care to ensure the accuracy and completeness of the information provided, each of the SGX Group Companies disclaims any and all guarantees, representations and warranties, expressed or implied, in relation to this material and shall not be responsible or liable (whether under contract, tort (including negligence) or otherwise) for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind, including without limitation loss of profit, loss of reputation and loss of opportunity) suffered or incurred by any person due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information, or arising from and/or in connection with this material. The information in this material may have been obtained via third party sources and which have not been independently verified by any SGX Group Company. No SGX Group Company endorses or shall be liable for the content of information provided by third parties (if any). The SGX Group Companies may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. Each of SGX, Singapore Exchange Securities Trading Limited and Singapore Exchange Bond Trading Pte. Ltd. is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this material is subject to change without notice. This material shall not be reproduced, republished, uploaded, linked, posted, transmitted, adapted, copied, translated, modified, edited or otherwise displayed or distributed in any manner without SGX’s prior written consent. Please note that the general disclaimers and jurisdiction specific disclaimers found on SGX’s website at http://www.sgx.com/terms-use are also incorporated into and applicable to this material. © Singapore Exchange Limited
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