Singapore retail market is underpenetrated: SGX

Singapore has only 350,000 active Central Depository accounts out of a resident population of 3.79m.

According to Maybank Kim Eng's recent discussions with the management of Singapore Exchange, the bourse is putting a lot of effort into the retail market segment in a bid to grow this slice of the pie, whose latent potential is hard to ignore. Maybank is positive on this development as it reinforces our argument that SGX has structural growth potential.

Here's more from Maybank:

Huge potential beckons. SGX’s internal studies show that despite Singapore’s reputation as a financial hub, its retail market is underpenetrated compared to its regional peers. The Republic has only 350,000 active Central Depository (CDP) accounts out of a resident population of 3.79m. This penetration rate of about 9% pales in comparison to Hong Kong’s 35% and Australia’s 43%, not to mention that Singapore has a higher GDP per capita than the two markets.

Impact of similar penetration. We estimate that about 18% of the current SDAV is generated by retail clients (based on the assumption that one-third of the 55% trading value from contract sizes less than S$1.5m is from retail clients). Our sensitivity analysis shows that SDAV should be at least S$2.1b today if local retail participation matches Hong Kong’s. This is excluding the knock-on effect of greater market buoyancy. In this scenario, the bottomline for SGX may hit S$390m.

Property curbs, casino fatigue will benefit SGX. Anecdotal evidence suggests that poor retail participation over the past 24 months may be partly attributable to more investments into real estate and the “casino effect”. However, with more property curbs being rolled out and the novelty of the two new casinos (which opened around mid-2010) wearing off, we think SGX may get more traction in its retail initiatives going forward. In turn, this will benefit SDAV.