Singapore Stock Exchange (SGX) is one of the leading and preferred stock exchange by investors that offers to trade various stocks, shares, ETFs etc. But this is not all as there is a whole lot of information that new investors probably do not know of SGX. This article will offer a complete guideline about how to become an investor in Singapore Stock Exchange to all the new investors.
What is the Singapore Stock Exchange?
Singapore Stock Exchange aka SGX is a stock market place for investors and traders to buy or sell stocks, shares, commodities, ETFs etc. The Singapore Stock Exchange apart from trading stocks offers services related to equities, derivatives, Exchange Traded Funds, Foreign Currency and commodities. There are 2 main reasons behind the gaining popularity of Singapore Stock Exchange namely Risk Management capabilities and Clearing capabilities.
How does the Singapore Stock Exchange Operate?
The Singapore Stock Exchange is a well categorized stock exchange as it has various divisions formed that are responsible to handle specific businesses. Every division is established to handle a particular set of business as under:
SGX ETS: ETS stands for Electronic Trading System. This division of SGX is responsible for providing investors around the globe access to SGX market.
SGX DT: DT stands for derivatives trading. This division offers services to investors for ease of derivatives trading.
SGX ST: ST stands for securities trading. This division offers services to simplify transactions related to securities trading.
SGX DC: DC stands for Derivatives Clearing. This unit of SGX is responsible for overlooking and handling clearing and settlement of derivaties trading.
SGX Asia Clear: This unit of Singapore Stock Exchange is responsible to handle and offer services related to trading of over the counter oil swaps and forward freight agreements.
SGX Reach: This unit of SGX offers services related to the online trading platform offered to investors for trading.
Central Depository Pte Ltd: As the name suggests this division of the Singapore stock exchange is responsible for offering services related to securities clearing, settlement of securities and depository services.
Asian Gateway Investments Pte Ltd: This unit is a wholly owned subsidiary by the Singapore Stock Exchange responsible for offering high security payment gateway platform for online security trading.
Singapore Exchange IT Solutions Pte Ltd: This division is responsible for providing hardware and software maintenance services.
Thus above are the major divisions of the Singapore stock Exchange. Let us get a complete working understanding of the SGX market in detail.
As we know the Singapore Exchange offers a platform to investors and trader to trade securities. Apart from providing trading services the exchange also offers aligned services like custody, clearance and settlement of securities.
The SGX is one of the biggest south Asian stock market that has a share of 40% listed companies and 75% of listed bonds that are originating outside of Singapore. All the companies that are listed on the SGX belong to either SGX Main board or SGX Catalyst. SGX has 640 companies listed as Main board listings and 134 companies as catalyst listings.
There is a difference between both the listings and in order to be listed on main board companies have to fulfill a minimum any one of the following quantitative requirement stated as under:
- A consolidated minimum pre-taxation profit of $30 mn for the latest financial year and an operating track record of minimum 3 years; or
- Consolidated profit in the latest financial year, operating track record of minimum 3 years and a market capitalization of not less than $150 mn by way of IPO i.e. Initial Public Offering; or
- Successful in generating operating revenue in the latest financial year and a market capitalization of not less than $300 mn by way of IPO i.e. Initial Public offering.
Thus by successful fulfilling of any one of the above condition companies can enroll themselves on the SGX main board listing. Alternatively, there is no such need for companies to fulfill any such quantitative requirements for listing themselves as catalyst, apart from appointing and maintain a sponsor. Sponsor is the one who is responsible for assessing the suitability of the companies to list as catalyst and will help and guide the company through the listing process.
What are the major listings on the Singapore Stock Exchange?
Singapore is one of the largest stock trading markets in Asia so there are many premier listings on the Singapore Exchange. The SGX market is dominated by stocks of real estate companies, banks, shipping companies and oil & gas companies. In terms of market capitalization companies like Jardine Group Members, Development Bank of Singapore, Singtel, OCBC Bank, Global Logistics and Hong Kong Land have a huge share.
What type of instruments can be traded on Singapore Exchange?
Following is the list of instruments that can be traded on the SGX market:
- Stocks: Stocks of companies i.e. the ownership certificates of the companies are traded
- American Depository Receipts: Commonly known as ADRs these are the stocks of companies that are traded in the United States of America but represent a certain number of shares in the foreign company.
- Company warrants: This instrument allows the investors to purchase the stock of a company at a fixed price and on a pre-specified date.
- REITs: REITs stand for Real Estate Investment Trusts. Investing REITs will generate income by investing in the stocks of real estate companies.
- Business Trust: This instrument invests the money of investors in stocks of companies or businesses that are run and operated by trusts.
- Exchange Traded Funds: Commonly known as ETFs. It is one of the most common and traded investment instruments over the stock market.
- Daily Leverage Certificates (DLC): This investment instrument is a type of structured financial instrument issued by banks. This instrument offers investors a 3 to 7 times of fixed leverage on the daily performance of the underlying traded asset.
- Leveraged and inverse Product: This is a type of derivative product that aims to offer a certain daily return on the investment that is equal to a multiple of underlying index return.
- Structured warrants: Type of structured investment offered by third-party financial institutions.
- Bonds: Bonds are categorized as government bonds and corporate bonds. This instrument is a debt instrument representing the loan taken by the company from the investor.
|Large Cap or Blue Chip Stocks||The large cap stocks are of companies that have a market capitalization is over and above $1.5 billion while a blue chip stock is a subcategory of the large cap. These are the stock of companies that have a profitable track record and consistently performed well even in adverse market conditions|
The characteristics of the large cap or blue chip stocks are:
|Mid Cap Stock||The mid cap stocks are of companies having a market capitalization between $1 billion and $1.5 billion|
The peculiar characteristics of mid cap stock are as under:
|Small Cap Stock||The market capitalization of these companies is below $1 billion|
The characteristics of small cap companies are as under:
|Penny Stocks||Penny stocks are the stocks that are valued at less than one dollar. the penny stocks are usually observed to be priced below $0.20|
The peculiar characteristics of penny stocks are as under:
Following table represents the fees charged by the brokerage firms on the CDP Accounts.
|Brokerage Firm||Minimum Fees||Particulars of trading fees charged based on the contract amount|
|Contract amount less than $50k||Contract amount more than $50k and less than $100k||Contract amount more than $100k|
|DBS Vickers||$25 (DBS Vickers offers 15% rebate on each trade)||0.28%||0.22%||0.18%|
|Lim and Tan||$25||0.28%||0.22%||0.18%|
|Maybank Kim Eng||$25||0.275%||0.22%||0.18%|
Thus above are the types of securities traded on the Singapore Stock Market. The above securities are categorized as under:
If you are an investor and wish to start trading on the SGX market then fulfill the following basic steps and you are good to start trading on the SGX market.
Thus above is a complete list of securities that are traded on the Singapore stock exchange, there sub-categories and peculiar characteristics of these securities. Let us understand how to start trading on the Singapore Exchange.
Open a trading account
The first step for starting trade in Singapore Stock exchange is to open a brokerage account. The opening of trading or a brokerage account will help investors to buy and sell securities on the SGX market. Singapore has a wide range of stock broking firms so investors can choose the stock broking firm as per their personal financial choices.
Open a CDP account
The next step is to open a CDP account. CDP stands for central depository account. The CDP account acts like a security vault where investors can deposit and store their stocks and securities. Kindly note, only ONE direct personal CDP account can be held by each individual investor.
Selecting a broker
Selecting a broker is an important milestone before starting off trading on the SGX market because it is important to know how much brokerage is paid for every transaction.Following is a detailed list of popular brokerage firms in Singapore and the brokerage fees they charge. Following list represent the brokerage firm fees charged on custodian Accounts.
Brokerage Firm Minimum Fees Particulars of trading fees charged based on the contract amount Contract amount less than $50k Contract amount more than $50k and less than $100k Contract amount more than $100k City Index $10 0.08% 0.08% 0.08% FSMOne $10 0.12% 0.12% 0.12% Standard Chartered $10 0.20% 0.20% 0.20% SAXO Capital Markets $10 0.12% 0.12% 0.12%
What are the eligibility criteria for opening a stock account?
Before starting trading at the SGX market an investor has to open a stock account. Following are the eligibility criteria for opening a stock account:
- The investor must have completed 18 years of age and above
- The investor must not be a un-discharged bankrupt
- The investor must have a bank account in any one of the following leading banks in Singapore namely: Citibank, DBS/POSB, HSBC, Maybank, OCBC, Standard Chartered and UOB
What is Securities Borrowing Lending Program?
Securities Borrowing Lending Program is the most innovative system that is operated in the Singapore Exchange. The Securities Borrowing Lending Program as the name suggests offers an opportunity to the investors and traders to borrow shares and stocks.
Securities Borrowing Lending Program (SBL) is a system that is generated to offer an opportunity to traders, investors, firms or corporate to borrow shares and securities that they do not own. Also, under the SBL program it is possible for the traders, investors, firm etc to even lend their shares, stocks and securities which they own but do not wish to sell in the near future.
The CDP offers more than 600 companies listed on the Singapore Exchange eligible for securities for a loan under the SBL Program.
Thus above is a complete guideline that will offer a complete understanding of the Singapore stock exchange to SGX Investor and will help a new investor to understand the complete overview of investing in SGX before taking a plunge in stock trading.