What it means
The exchange brings together companies that want to raise money and investors who want to buy a stake in them. Companies list their shares to gain access to capital, a public profile and a market price, while investors gain a regulated place to trade with transparent rules.
Day-to-day oversight of the market is shared between the exchange and Singapore's central bank, which also acts as the country's financial regulator. A large part of its business is derivatives rather than ordinary shares.
Futures and options on Asian equity indices, currencies and commodities trade there, and many are available for much of the day because the exchange sits in a time zone that overlaps with both Asian and European business hours. International banks and funds use these contracts to hedge (offset) their exposure to Asian markets.
For a non-finance professional, the practical relevance is usually twofold. If your company lists there, you will deal with continuing disclosure rules, which require you to announce price-sensitive news promptly and publish periodic results.
If you sell to or buy from listed Singapore companies, their filings give you a free and standardised window into their financial health. The exchange earns its own revenue from several streams.
Trading and clearing fees rise and fall with market activity, listing fees are charged to companies, and data and connectivity services are sold to the firms that need them. Because trading fees depend on volumes, the exchange's own profits tend to be strongest when markets are busy and volatile.
One nuance is that Singapore's market has a large share of foreign listings and foreign investors relative to its size. A company listed there may earn most of its revenue in other countries, so its share price often reflects regional conditions rather than only the Singapore economy.
Prices on the exchange are quoted mainly in Singapore dollars, although some products are quoted in other currencies such as the US dollar.
In practice
Real-world examples.
Example
A manufacturing company based in Malaysia wants to raise growth capital and a profile with Asian institutional investors. Its directors decide to list on the exchange, accepting the extra disclosure obligations in return for a wider pool of buyers. The finance team budgets for listing fees, sponsor advisers and ongoing reporting as part of the cost of being public.
Example
A European asset manager holds a large portfolio of Asian shares and worries about a sudden fall during the Asian trading day. Its risk team uses index futures traded on the exchange to hedge the exposure without selling the underlying shares. The hedge costs a small amount in fees and margin but protects the value of the portfolio overnight.
Example
A procurement manager at an electronics distributor is deciding whether to extend 90 days of credit to a new customer. She reads the customer's annual report and half-year results on the exchange's announcements page to check its debt levels and cash position. The standardised filings let her complete the credit review in an afternoon.
Case study
Seen in the real world.
Harbourlight Logistics is an illustrative, fictional freight company with operations across six Asian countries. For years it financed expansion with bank loans, but rising interest costs and loan covenants (conditions attached to borrowing) began to limit its choices.
The chief financial officer proposed listing on a regional exchange to raise equity instead. The board weighed the benefits of fresh capital against the costs of quarterly reporting, investor relations and a loss of privacy about contract terms. After a year of preparation the company listed, raised enough equity to repay its most expensive loans, and its leverage (the proportion of funding that comes from debt) fell sharply.
The illustrative lesson is that a listing is a financing decision with a permanent operating consequence. The money was valuable, but so was the discipline: the management team now had to explain its numbers to analysts every quarter.
Watch out
Common mistakes.
- Treating the exchange as a company's regulator, when it is a market operator that sets listing rules while the central bank and other authorities carry the wider supervisory role.
- Assuming every company listed there is based in Singapore, when a large share of listed companies operate mainly in other countries.
- Reading a share price quoted in Singapore dollars as if it were US dollars, which distorts any comparison with a company listed elsewhere.
Questions
People also ask.
Is the Singapore Exchange only for shares?
No, it also trades bonds, exchange-traded funds, and a wide range of futures and options on indices, currencies and commodities.
Can a foreign company list there?
Yes, companies from many countries list on the exchange, provided they meet its admission and disclosure requirements.
Why does a listed exchange care about market volatility?
Because much of its revenue comes from trading and clearing fees, higher activity generally increases its income.
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