Here are 4 areas they may look into. SGX is no stranger to M&A deals – it previously acquired the Energy Market Company (EMC) and the Baltic Exchange. Its attempted takeover of the Australian Securities Exchange (SGX) was also highly publicised, according to CIMB. However, the EMC and Baltic Exchange acquisitions were relatively small compared to SGX’s market cap and did not move the needle much in terms of bottom line. "With a war chest of S$395m and room to gear up/raise funds, we think SGX could look for large M&As. CEO Loh Boon Chye highlighted four areas where SGX is open to pursuing M&A deals," said Jessalynn Chen, analyst with CIMB. Here's more from CIMB: These include: 1) fixed income, 2) foreign exchange, 3) market data, and 4) index businesses. Acquisitions in these areas could provide a boost to net income, diversify SGX’s earnings base away from the volatile stock market, and reduce dependence on key derivatives contracts such as the China A50 index futures and iron ore futures. With the SGX Bond Pro platform in place and foreign exchange futures contracts gaining traction, we think it is possible to grow these businesses organically. Instead, we think the key is in acquiring market data and index businesses to provide an added leg up to earnings.
The Singapore Exchange (SGX) could be interested in putting its $395m war chest to use in M&A deals in foreign exchange, fixed income, index businesses and market data, according to CIMB analyst Jessalynn Chen. Investing in these key areas is expected to help to shift revenue away from the volatile stock market, and reduce dependence on certain derivatives contracts.