Everyone knows SGX stand for the Singapore Stock Exchange. But how much do you really know about SGX? For new investors, this is a crash-course on becoming an investor of Singapore stocks.
What is SGX?
Singapore Exchange (SGX) is a stock exchange for Singapore stocks. It is a place where stocks trading between investors takes place. SGX also provides different services related to equities, fixed income, derivatives, commodities and foreign currency exchange (FX). Headquartered in AAA-rated Singapore, SGX is also globally recognized for its risk management and clearing capabilities.
How does it operate?
SGX has multiple different divisions, and every each of them is responsible for handling specific businesses.
1. SGX ETS (Electronic Trading System): provides global trading access to SGX markets.
2. SGX DT (Derivatives Trading): provides derivatives trading.
3. SGX ST (Securities Trading): provides securities trading.
4. SGX DC (Derivatives Clearing): subsidiary for clearing and settlement operations.
5. SGX AsiaClear: offers clearing services for over-the-counter (OTC) oil swaps and forward freight agreements.
6. SGX Reach: an electronic trading platform.
7. Central Depository Pte Ltd: subsidiary responsible for securities clearing, settlement and depository services.
8. Asian Gateway Investments Pte Ltd: wholly owned subsidiary
9. Singapore Exchange IT Solutions Pte Ltd: provides computer services and maintenance as well as software maintenance.
SGX being Asia’s most international, multi-asset exchange has about 40% listed companies and 75% of listed bonds originating outside of Singapore. (640 mainboard listings and 134 catalist listings)
Key difference between Mainboard and Catalist listing:
A company has to satisfy at least one of the following quantitative requirements in order to be qualified to list on the SGX Mainboard:
(a) minimum consolidated pre-tax profit of at least S$30 million for the latest financial year, and an operating track record of at least three years;
(b) profitable in the latest financial year, have an operating track record of at least three years, and have a market capitalisation at initial public offering (“IPO”) of not less than S$150 million; or
(c) generated operating revenue in the latest completed financial year, and have a market capitalisation at IPO of not less than S$300 million.
No quantitative requirements are required for a Catalist listing but one needs to appoint a sponsor, who will assess its suitability to list and will advise and guide the company through the listing process. Also, the company must maintain the sponsor at all times after listing.
OPENING A TRADING ACCOUNT:
1. Understanding Central Depository (CDP) account and brokerage account:
A CDP account allows the stocks and other listed securities you buy on the SGX to be automatically deposited and stored for you. Each individual can only hold one direct personal account with CDP.
For brokerage account, it gives individual access via the brokerage firm to the securities exchange to buy and sell stocks and other securities. Unlike CDP account, you can have more than one account with the brokerage firm.
2. Selecting Your Broker
It is important to know what and how much you are paying for one transaction. Therefore, we have prepared a list of the more popular brokerage firms in Singapore and their fees. All trading fees are based on online/mobile trades done in the Singapore market
|Brokerage Firm||Minimum Fees||Trading Fees (based on contract amount)|
|<$50k||$50k to $100k||>$100k|
Stocks Held: Custodian Accounts
|SAXO Capital Markets||$15||0.12%||0.12%||0.12%|
Stock Held: CDP Account
|DBS Vickers||$25 (15% rebate on each trade)||0.28%||0.22%||0.18%|
|Lim and Tan||$25||0.28%||0.22%||0.18%|
|RHB Securities (formerly DMG)||$25||0.275%||0.22%||0.18%|
|Maybank Kim Eng||$25||0.275%||0.22%||0.18%|
|Phillip Securities (POEMS)||$25||0.28%||0.22%||0.18%|
|KGI Securities (formerly AmFraser)||$25||0.275%||0.22%||0.18%|
3. Who Is Eligible For Opening A Stock Account?
Before you open one, make sure you have met the following eligibility criteria:
- You must be 18 years old and above
- You must not be an un-discharged bankrupt
- You must have a bank account with one of the following banks in Singapore – Citibank, DBS/POSB, HSBC, Maybank, OCBC, Standard Chartered Bank and UOB.
4. Understanding Securities Borrowing Lending (SBL) Programme:
Securities borrowing and lending (SBL) is a system in which traders, investor or firm borrow shares that they do not already own, or lend the stocks that they own but do not intend to sell immediately.
What are the eligible securities for loan:
CDP offers more than 600 SGX-listed securities for loan under this SBL programme.
Here is the list of eligible securities under the SBL programme
Screenshot of the Lending Pool from SGX website:
Types Of Stocks Available to Trade/Invest:
How to Identify Blue Chip Stocks, Small Cap & Mid Cap Stocks, and Penny Stocks in local, SG context
|Large Cap/ Blue Chips||Exceeds $1.5 billion
Within large caps in another subcategory of companies known as the Blue Chips
|Generally yields the least amount of risk compared to mid and small cap stocks
Lower betas than mid and small cap stocks.
|Mid Cap||Between $1 billion and $1.5 billion
|Mid-cap companies tend to offer more growth potential than large-cap stocks.
Less volatility than the small-cap segment.
Mid-cap companies offer more stability than small-cap companies yet confer more growth potential than large-cap companies.
Below $1 Billion
|Small cap stocks give individual investors an advantage over institutional investors.
Offer investors more room for growth but also confer greater risk and volatility than large-cap companies.
|Penny Stocks||Any stock below $0.20 is a penny stock||High risk investment due to low price.
Lack of liquidity
Small market capitalization
Wide bid-ask spread
List of Securities That Can Be Traded On SGX
Stocks – the ownership certificates of any company
American Depositary Receipts (ADRs) – are stocks that trade in U.S. but represent a specified number of shares in a foreign corporation. (EG: Aluminium Corp of China, Baidu, Sinopec Petrochemical)
Company Warrants – a security that gives you the right to purchase a company’s stock at a fixed price and at a specific date.
REITs – Real Estate Investment Trusts are companies that own or finance income-producing real estate in a range of property sectors.
Business Trust – a trust that runs and operates a business enterprise, it can be in any field. (EG: Arcadia Golf Trust, NetLink NBN Trust)
Exchange-traded Funds (ETF) – a marketable security that tracks an index, a commodity, bonds, or a basket of assets.
Daily Leverage Certificates (DLC) – a form of structured financial instrument issued by banks that offer investors a fixed leverage of 3-7 times of the daily performance of the underlying index.
Leveraged and Inverse Product – derivative products traded on SGX that aim to deliver a daily return equivalent to a multiple of the underlying index return. (EG: X2 of what the underlying index does)
Structured Warrants – a form of structured investment products that is issued by a third-party financial institution over a wide range of assets. This includes the shares of non-related listed company, a basket of companies’ shares or an index, and traded on SGX.
Bonds – can be categorized into government bonds and corporate bonds. They represent debt obligations which is a form of borrowing.
Common Acronyms That You Will Encounter On SGX:
s=Catalist Non-Sponsored, g=GlobalQuote,
CA=Any combination of Cum remarks, XA=Any combination of Ex remarks, J=Adjust,
|Listing Type||LT: Listing Type ,
How is SGX performance being measured?
Since SGX consists of hundreds of listed companies throughout the industries, it is difficult to keep track how well the exchange as a whole is performing, that is when Straits Times Index (STI) comes in.
STI is often referred to as a stock market benchmark or the proxy for SGX. What a market index does is that it takes the weighted average value that is produced by several key stocks within the exchange/stock market, and expresses their value against a base value to create the market index that has a value to it. In this case, Straits Times Index serves as the market index (also known as a proxy) for SGX.
Investors use STI as a gauge to tell how well/ badly the stock market is performing in Singapore. Even though, STI only consists of the top 30 companies listed on SGX, these companies have already constitute about 60% of the overall market size in the SGX. Hence, they could be a good proxy to how the entire stock exchange is performing.
Corporate Announcements are official announcements filed by listed companies with SGX. From corporate announcements, investors will get all the latest information of companies, including financial results, changes in voting rights, merger and acquisitions, share-buyback from directors etc.
The corporate calendar is also very useful for investors to know the upcoming major events for each and every individual stock such as Annual General Meeting (AGM), Extraordinary General Meeting (EGM), ex-dividend dates etc.
As the saying goes by failing to prepare, you are preparing to fail. As a new investor, it is essential to understand how a stock market works before taking a further step in trading or investing.
For more articles to help you get started as a new investor, visit our Invest Academy repository here.
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