Singapore Exchange Q2 net misses expectation, eyes merger

Singapore Exchange (SGX) said on Tuesday it was on track to complete its USD 7.8 billion merger with Australian bourse operator ASX in 2011, as it missed forecasts for quarterly profit on higher costs such as technology spending.

SGX, Asia's second-biggest listed bourse operator after rival Hong Kong Exchanges and Clearing, reported an adjusted 14% rise in October-December profit and said it will benefit from higher securities and derivatives turnover in the financial year.

SGX said the regulatory process related to its merger with ASX was proceeding as planned.

"We continue to work with the relevant stakeholders, including (Australia's) Foreign Investment Review Board, with the aim of completing the proposed combination in 2011 ," SGX CEO Magnus Bocker said in a statement.

The bid to take over ASX overcame a hurdle last month when the Australian competition regulator cleared it.

But the deal to create Asia's fourth-biggest bourse by volume still needs the approval of Australia's parliament and some politicians have expressed concern that a foreign takeover would not be in Australia's interest.

Bocker, who joined the exchange in December 2009 from NASDAQ OMX, has tried to boost trading volumes by rolling out new products such as the American Depository Receipts of top Chinese companies and getting more parties to trade on SGX as Singapore loses out to Hong Kong in the race for mega-listings.

SGX earned S$81.7 million (USD 63.5 million) adjusted net profit in October-December, compared with S$71.8 million a year ago. If transaction costs related to the merger with ASX were included, net profit was S$74.2 million, little changed from the first quarter.

Analysts had forecast an average S$84.7 million net profit for the company's second quarter, according to a Reuters survey of five analysts.

Securities market revenue which was about 47% of total revenue, rose 20% to S$81 million on higher turnover from a year earlier. Derivatives revenue also climbed 8 percent, helped by volumes from options and commodities.

SGX has launched a slew of over-the-counter derivative products such as metals and commodities which could position the bourse as a commodity exchange between China, Australia and the rest of Asia, said CIMB's Kenneth Ng in a research note.

Technology spending increased 33% to S$25.6 million.

Still, SGX shares underperfomed the broader market in the fourth quarter and have fallen about 18% since hitting its highest level in more than two-and-half years in mid-October, as investors turned negative on its bid for ASX.

SGX shares closed down 0.12% on Monday, versus a 0.23% fall in the broader market. ASX shares were down 0.4% in early morning trade on Tuesday.