Relooking at stock exchanges

SGX had fell to an unprecedented low after the announcement of HKEX collaboration with the MSCI index providers. SGX clearing and settlement segment has been largely stagnent and is largely banking on its derivative businesses for future growth. The proposed entry of HKEX into the China futures index derivatives business hammered down SGX to attractive PE ratios.

Although I do not utilise derivatives in my portfolio, to my knowledge professional fund managers use derivatives as price insurance, whereby they will cover their downside risks through combination of call put options or other exotic instruments. Treasury departments and cross nation organisations utilize forwards and swaps to hedge against FX risk, the adventerous utilise them as short term betting tools to reflect their views on the market, and some simply take a risk neutral view by utilising certain combinations to reflect the underlying performance of an asset / index.

I intiated a mid conviction position as my initial assessment is that SGX is a monopoly in a high margin business with a strong balance sheet. Further positions into this stock will require more indepth examination.

Links
https://www.hkex.com.hk/News/News-Release/2019/190311news?sc_lang=en

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