Investment and Portfolio Management Organized Market Place

Question: Discuss about the Investment and Portfolio Management for Organized Market Place. Answer: Introduction Brief history of Singapore Exchange Limited Stock Exchange is an organized form of marketplace where securities of various companies are listed and traded. Singapore Exchange Limited (SGX), located in Singapore, was founded in December 1999. It is an investment company which facilitates the formation of capital and thereby supports economic and financial growth of the country. SGX is governed under the chairmanship of Chew Choon Seng with a market capital of US$ 8.19 billion. About 771 companies are listed on the SGX among which almost 40% are overseas companies (Raghuvanshi, 2016). From the last nine consecutive years, SGX is ranked as the best market place for the investors for doing business across the world. It plays a major role in the securities and derivative market of Asia (sgx, 2016). Shareholding of Singapore Exchange Limited Figure 1: Shareholding of Singapore Exchange Limited Image Source: (Lim, 2015) The shareholding of Singapore Exchange Limited has been shown in the figure 3. The graph indicates that 62 % of the shareholding is among the Singapore based companies whereas other 38% are the overseas companies listed on the SGX. The majority of the shareholding i.e. 24% is from the South East Asia while other 15% shareholding is from Hong Kong. Japan and Korea has a shareholding of 5% in the Singapore Exchange. Whereas, Australia and Europe has the shareholding of 4% and 3% respectively in the Singapore Exchange Limited. These shareholdings show that the SGX has its presence all around the world. It provides many investors various opportunities to invest in the international market. With the increase in its stability and economic growth Singapore Exchange diversifies its products and services. Since 1981, monetary and fiscal policy in Singapore has maintained a center position in the supervision of the exchange rate. Singapore Exchange limited has been established with an objective of promoting stability in the prices for the sustainable economic growth. It is known as the fastest emerging market of stock exchange in ASEAN. However, Singapore Exchange Limited was formed with the cancellation of some earlier exchange companies; specifically Singapore International Monetary Exchange (SIMEX), Securities clearing and Computer Services (SCCS) and Stock Exchange of Singapore (SES). These companies have issued new shares in the market which were paid up by Singapore Exchange Limited. In the year 2000, SGX has become the second listed exchange company through public and private placement offer in the region of Asia Pacific. The Asian and Oceanian Stock Exchanges Federation and World Federation of Exchanges are the members of Singapore Exchange Limited. SGX offers various securitie s and derivatives related trading services to its customers. This investment holding company brings different companies together whose investor wants to grow with different opportunities. The securities market of Singapore Exchange Limited provides tools to their investors which help them to manage risks and exposure in commodities, currency markets and equities (shareholder, 2014). Stock prices of Singapore Exchange Limited Figure 2: Graph showing stock prices of Singapore Exchange Limited Image Source:(morningstar, 2016) The stock prices of Singapore Exchange Limited have been shown in the graph above. The data has been shown for the last five years i.e. from 2011 to 2016. Graph 1 shows fluctuation in the stock prices in the last five years. Y axis of the graph shows the volume of stock traded while X axis represents the time period i.e. year. There are various factors which influence stock prices of Singapore Exchange Limited including economic and political policies, market conditions, regulatory framework of Singapore, financial performance of the company etc. In the early 2011, stock prices of SGX were lower than the prices of stock in the year 2013. However, stock prices of SGX were highest in the late 2014 among all the five years. Singapore Exchange Limited has observed high rate of fluctuation in their stock prices due to prevailing market conditions of the country. Despite of many ups and downs in the stock prices, SGX is currently experiencing stability in its stock prices. Highest volume o f stocks traded by Singapore Exchange was 4,633,400 in the last five years (morningstar, 2016). Whereas, lowest volume of stock traded in the last five year was 6, 37,000(morningstar, 2016). The stability in the stock prices of SGX increases the investment opportunity for many investors. Earnings Per share of Singapore Exchange Limited Figure 3: Earnings per share of Singapore Exchange Limited Image Source: (morningstar, 2016) Graph 2 shows the Earning per share of Singapore Exchange Limited for the five years i.e. from 2012 to 2016. X axis of the graph indicates the year while Y axis shows EPS of SGX. From the above graph it can said that the Earnings per Share of SGX is stable. From the year 2012 to 2016, EPS is calculated as 0.27, 0.31, 0.30, 0.33 and 0.33 respectively. Therefore, in the year 2016, EPS of SGX has been observed as the highest over the last five years. The basic and diluted EPS of the Singapore Exchange Limited is similar in these five years (morningstar, 2016). Discussion Operation of Singapore Exchange Singapore Exchange Limited is the holding company of investment which operates in multiple locations across the world. SGX operates in the trading and clearing of both products including securities and derivatives. The structure of SGX is formed in such a manner that it operates in the several divisions of the exchange market. It engages in the management of treasury, stipulation of administrative services and management of the related corporation, technology connectivity services and contract processing provision. Singapore Exchange Limited functions through the operation of different business segments including securities market and derivative market. In the securities market, SGX offers clearing, trading and settlement of exchange traded funds, structured warrants and stocks. It also provides market data, connectivity services, and member and issuer services. Whereas, derivative market of the company provides the investor with a large portfolio of products related to derivative ac ross commodities, currencies and equity indices. SGX is the single clearing house based in Asian for financial derivatives and over the counter commodities. The other business segment of Singapore Exchange Limited offers services other than related to securities and derivatives market. Singapore Exchange Limited operates in the trading hours involving 9 a.m. to 5 p.m. It executes its operation daily through an intraday and ends of day clearing cycle. The stock market of Singapore is diversified into different sectors and products. The major ten active stocks of SGX on the daily basis signify six different sectors. While, nearly 150 business sectors is represented by 700 stocks listed on the SGX. However, Singapore Exchange also operates in the security products including business trust, real estate investment trust, structured warrants and exchange traded funds. SGX focuses on the execution of long term strategic goals of the company for the growth and development of the products and services it offers to its customers. SGX has strengthened its regulatory function while considering the global economic concern. It has also grown its presence in the Asian market with more opportunity of trading venues and deployment of its resources. SGX operates on the basis of esta blished framework, identifying the area of significant risk and supervisory attention. It strengthens the risk management system and internal control of the listed share among different sector of the business operations. Products Offered Singapore Exchange Limited offers various products and services to its customers. The wide range of products offered by SGX is divided into sub groups based on its features including securities, fixed income and derivatives. Securities Singapore Exchange deals in various securities including stocks, ETFs, ADR, REIT and structured warrants to safeguard against the insider trading. Stocks Stocks of the company indicate the ownership of the investor in a company along with the claim investor has on the assets and earnings of the company. Straits Times Index is the standard benchmark for the Singapore Exchange market. Through this benchmark, performance of stocks of top 30 listed companies are tracked which contributes to the capital and liquidity growth of the country (sgx, 2016). Exchange Traded Funds There are around 80 exchange traded funds listed in the SGX that provides an exposure to different areas of asset classes. It is an investment in the open ended fund which aims to signify the performance of market index. Many investors invest in the Exchange Traded Funds in order to maximize the exposure in the constituents of index by expanding their portfolio under index market (sgx, 2016). American Depository Receipts Singapore Exchange is the first stock exchange that provides trading of the international securities including depository shares and receipts of the company which are previously listed on the other stock exchange. American Depository Receipts offer an access to the investors to trade in the international securities of the largest companies around the world (sgx, 2016). Real Estate Investment Trusts and Business Trusts SGX also offers the investor to invest in REIT and business trusts to generate income through real estate. The units of business trust and REIT are traded on the market driven prices. Investment in REIT and business trust possesses various benefits including tax benefits, diversification in the portfolio and income distribution (sgx, 2016). Structured Warrants SGX offers Structured Warrants with an underlying coverage value of stocks and indices of Asia that allows many investors to access leverage in the domestic and foreign markets both (sgx, 2016). Fixed Income Investment in the fixed income guards the investor against any capital loss over a period of time. The securities offering fixed income provide flexibility to attain several investment goals (sgx, 2016). Retail Bonds Retail bonds offered by SGX are sold to the retail investors in the stock market. The government and corporation agencies offer these bonds in order to raise money for the accomplishment of specific projects. Preference Shares Income on Preference stocks pays a fixed amount of dividend to its shareholders. This share provides priority to its shareholders over other shareholders of the company. Singapore Government Securities Singapore Government Securities bonds are usually issued for a period of more than one year. Monetary Authority of Singapore issues these bonds on the behalf of Government of Singapore. Derivatives Financial Products The financial products of Singapore Exchange Limited include different products that help the investor to manage risk and get exposure in the market of equity, interest rates and currencies. It allows the investor to evade their investment against uncertainty in the environment of monetary and macroeconomic policy. The financial derivatives of Singapore Exchange offer tools to its investors that position them in the best manner in the changing market environment (sgx, 2016). Commodities Products In the recent decades, global demand for commodities products has increased rapidly. Through investing in SGX commodities products, both investors and managers position themselves from high fluctuation in the prices of commodities for the purpose of operation and investment. The commodities products of Singapore Exchange include rubber, coal, precious metals, freight, iron ore and steel, electricity and oil and gas (sgx, 2016). How investment managers managing their respective portfolios Investment in securities and derivatives involves diversification of investment portfolio as well as it involves financial risk. The investment manager therefore needs to develop some strategy in order to maximize return and liquidity and thereby also reduces risk among portfolio. The investment managers classify their portfolio on the basis of its operational efficiency, market opportunities, regulatory environment and prices of the investment products. The managers measure the balance between risk and return involved in the investment of portfolios. Managers choose the investment products based on the suitability of the customers' expectations and thereby rebalance the portfolio every year depending on the situation of market conditions. They also manage their portfolio through keeping the cost of assets at its minimum. Managers also consider implementation of tax while investing in different assets of the company. Conclusion Singapore Exchange Limited is one of the largest stock exchange company, deals in trading, clearing and settlement of securities and derivatives. Investors have many opportunities to maximize return through investing in SGX as it offers wide range of products and services to the investors. Bibliography Lim, S., 2015. 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