The Gulf region is becoming an increasingly important market for the Singapore Exchange Group, where it serves clients from Saudi Aramco to First Abu Dhabi Bank, and it plans to expand the suit of its services in the six-member economic bloc, SGX group president Michael Syn has said.
Over the past few years, the company has seen a steady growth both in its shipping and FX businesses in the region, with some of the biggest banks and financial institutions as well as hedge funds and energy majors in the region joining an expanding list of clients across various business within the group, Mr Syn told The National in an interview.
“For now, it is commodities and FX, for all the natural reasons, he said. “In shipping, we see a lot of growth, and we expect to spend more time here and do more business.”
The group own and operates Singapore Exchange, South-East Asia’s biggest equities market and the world’s third-largest foreign exchange trading hub. It also runs the global maritime trading and shipping market, the Baltic Exchange, and through its subsidiaries manages FX technology business, as well as a power sector software and consulting company.
Growth in commodities
The Baltic Exchange, a global provider of maritime data for the settlement of physical and derivative contracts, has 70 members from the Gulf region − including some of the biggest energy companies, such as Saudi Aramco, Adnoc, Qatar Energy, and oil and gas firms from Kuwait.
“We expect to see more and more members join this network” from the region including ship owners, trading firms, as well as hedge funds, Mr Syn said.
“Commodity trading hedge funds also need to trade the shipping links, so funds are getting more and more involved in freight derivatives, and the Baltic is the benchmark for all freight derivatives,” he added.
The significance of the Gulf region’s shipping and related businesses has grown manyfold, especially after the pandemic.
“So, we've seen more ship owners here, importantly, more ship brokers here,” he said.
Some shipping routes from this area are vitally important “both for tankers and even for naphtha for the petrochemical business, and that's very big”, he explained.
Tech opportunity set
The company’s technology business for banks and financial institutions, hedge funds and the assets owners, is another “huge opportunity set” and SGX is keen to further expand that business in the region.
“We provide leading edge tech for buy side − hedge funds and asset managers, asset owners,” Mr Syn said.
It also serves banks on the sell side who need to pull in FX prices from across the world and re-quote these those prices to their corporate, private bank or individual customers.
“We provide that technology because we have the global FX network,” he said.
“We've done a lot of work, we're signing up banks, we are adding new services to many of these banks and some of these banks are even saying, ‘hey, if I'm doing FX, can I do crypto?’”
Singapore exchange is one of the most liquid multi-asset markets globally, which over the years has also risen to become a top global FX centres in the world.
Last October, the Monetary Authority of Singapore announced that the country’s FX average daily trading volumes rose to $1.48 trillion in April last year, 60 per cent jump from the levels seen during the same month in 2022.
The regulator, citing the Bank for International Settlements data, said the latest report helps Singapore strengthen its position as the third-largest FX centre in the world, after the UK and the US.
“I do believe that commodities [business] in the region has grown, notionally, more than FX”, however, in absolute terms SGX Group is seeing “more growth in our FX franchise because we have more offerings in FX”, said Mr Syn.
Suitcase coverage
Asset owners, including family offices, institutional investors, and sovereign wealth funds in oil-rich Gulf states, as well as the rapidly-growing number of large asset managers in the region remain “very relevant to us in their equity investments because we are pretty much the world's dominant Asian equity derivative franchise”, he added.
Though the business is expanding in the Gulf, the SGX Group does not have immediate plans to set up a dedicated office to serve its regional clients.
“We absolutely cover customers in this region … but for now, it is suitcase coverage, but I can very much see that [office] in the coming years, as it will be necessary for customer success to be closer to the customer,” said the SGX group president.
The Singapore exchange has been considering plans to open an office in Dubai, drawn by the surge of hedge funds that have settled in the UAE, media reports cited the then SGX head of wholesale markets Lee Beng Hong as saying in the fourth quarter of 2024.
“Given the success we’ve had in the Middle East, it’s the right time for us to grow our presence there,” Mr Syn said at the time in an interview with Bloomberg. “We are actively looking at that.”
Mr Syn said the group already has many market capabilities in the region and they are “accelerating and importance”, be it power sector, shipping or FX technology.
While banks are SGX tech users, its technology is also installed in data centres, and with growth in other business, the group “requires connectivity, as it's all built on the fabric of what's evolving very quickly”, he said.
“So, we're going to have to get a lot of stuff done before what is relatively still a small space, which is derivatives and futures in the traditional stock exchange space,” added Mr Syn.
M&A options
The group is exploring both organic and inorganic growth opportunities across markets including the Gulf region and it is constantly looking at the options to boost the suit of its products and services, which are synergistic to its customer network.
“I think searching is just part of the job. The management team's job is to constantly look, and if opportunities avail themselves, then we're happy to look at acquisitions.”
In the meantime, however, the focus remains on expanding its businesses organically. Currently, SGX’s FX business is growing at about 30 per cent annually while commodity is expanding between 20 to 30 per cent, Mr Syn said.
The group, which through Singapore Exchange, acquired the privately-owned Baltic Exchange in a $108 million deal in 2016, is consistently weighing options of how to allocate its resources to grow the existing lines of its business versus looking for a new acquisition.
“But I think we'd be happy to look at new opportunities, because so many new business models are emerging that I think we can acquire. And not just a business, but also new talent, new people, new customer footprint, even that will be very interesting to us.”
In terms of potential acquisitions in the broader Middle East region, Mr Syn said he still needs to find out more and “that's why I'm travelling more”, through the region to meet clients as well officials.
