What happened
Back in May, Singapore Exchange Limited (SGX: S68), or SGX, announced that it will launch a new product under the Thailand-Singapore depository receipt (DR) linkage.
This new product is called Singapore Depository Receipts, or SDRs, and will provide investors with more efficient access to regional markets.
SDRs are available to both retail and institutional investors for trading on 30 May 2023.
So what
SDRs can be traded by investors via their local brokers and make it more convenient for Singaporean investors to buy shares of companies listed on other foreign exchanges.
In addition, SDRs will trade on the SGX securities market during local trading hours and will be denominated in Singapore dollars.
On this note, there are three inaugural SDRs that are issued by Phillip Securities.
These three Thai stocks are touted as blue-chip businesses and comprise Airports of Thailand (SGX: TATD), CP All (SGX: TCPD), and PTT Exploration & Production (SGX: TPED).
The trio are components of the benchmark SET50 Index.
These three stocks saw a full month of trading in June and as of 28 June, saw close to S$200,000 in retail net inflows.
The bulk of these inflows belonged to the Airports of Thailand while the top-traded SDR was PTT Exploration & Production.
Now what
The launch of the SDRs is a positive development for SGX and demonstrates its commitment to increasing the breadth of securities offered to investors, in line with its aim to become an effective multi-asset exchange.
The DR linkage also acts as a catalyst to spur further cooperation between SGX and regional exchanges, with the potential for more bourses to join in as a method to promote the cross-listing of securities on both exchanges.
With healthy inflows seen for all three Thai stocks, it opens the possibility of more Thai stocks being listed on SGX through the DR linkage, thereby allowing more SDRs to be listed.
There may also be a reciprocal arrangement where Singapore-listed stocks get a chance to be listed on the Thai stock exchange where companies can gain wider exposure to a larger group of investors.
In short, things could get interesting in the coming months as there is a multitude of possibilities regarding the direction this DR linkage could go.
For SGX shareholders, SDRs should be viewed as an effective method to increase trading volumes, thereby boosting SGX’s securities trading volumes and helping to generate interest in its product slate.
Investors can look forward to more progress on the SDR front in the coming quarters as SGX looks to expand on this initiative.
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Disclosure: Royston Yang owns shares of Singapore Exchange Limited.
