Good morning, ladies and gentlemen, and also to those viewing online over the webcast system. Welcome to SGX Group's first half FY 2024 results briefing. This morning's agenda will kick off with a presentation of our financial highlights and performance by Mr. Ng Yao Loong, our CFO. This will be followed by a business update by our CEO, Mr. Loh Boon Chye. Following which, we will end off the briefing with a question and answer session with SGX senior executives. Without further delay, let me hand over the stage to our CFO, Mr. Ng, please.
A very good morning, and thank you for joining us for this, half year results briefing. Our half year financial performance reflects the resilience of our multi-asset exchange amidst a challenging macroeconomic environment. We saw strong growth in currencies and commodities, which we'll talk about later. But as a group, earnings-wise, on an adjusted basis, it increased 6% to SGD 251 million. This is a metric that we have been showing. Adjusted earnings gives a better reflection of our underlying performance as non-cash and one-off items are excluded. This improved earnings was driven by a 4% increase in revenue and a lower growth in expenses of 3%. As a result, we saw improvements in both operating margins and at the earnings level as well. Now, let me run through the details of our financial performance.
So this half, we continued to cement our position as the platform of choice for Asian access and portfolio risk management. So on the left, our derivatives franchise across the various asset classes grew 6% or $16 million more. In aggregate, it contributes 45% of our group revenue and includes both trading and clearing revenue and the associated treasury income. So we saw robust volume growth from commodities and FX derivatives and also OTCFX. So commodities DAV, or daily average volume, increased almost 50%, with volume increases across all commodities products. Currency futures DAV grew 25%, mainly driven by our CNH contract. Our OTCFX business continued to see healthy growth, as you can see from the chart on the right, with ADV increasing 46% to $100 billion.
On the other hand, our broader equities business, both cash and derivatives, face challenges, given the elevated interest rate environment, concerns over economic growth, which had a negative impact on market sentiments. So we saw a 12% decline in SDAV, or securities daily average traded value, and also a 13% decline in DAV, given the weaker investment sentiments on China, and also the decline in the Nifty volumes as we migrated our members and clients to the GIFT Connect. Before I go into the financials, I wanted to explain and give a sense of the reclassification of our segments. It's not a major change. In October last year, we implemented a new organizational structure to capitalize on the strengths of our multi-asset offering, and to further scale the business across products and platforms.
So from a financial reporting perspective, we decided to also revise the presentation of revenue in our income statement into four operating segments to better reflect the nature of our revenue streams. So the four operating segments, from left to right, are fixed income currencies and commodities or FICC, equities cash, equities derivatives, platform and others. So the nature of revenue in the first three segments, FICC, equities cash, and equities derivatives, are largely transaction or volume driven. Whereas the nature of revenue classified under platform and others are largely non-transaction driven. For comparability, the segment information for the period first half FY 2023 has also been restated. So where are the changes? The main change is in the FICC segment, where revenue from EMC and Baltic Exchange have been reclassified to platform and others.
In addition, the membership-related fees previously in FICC and in the equities business have also been reclassified to platform and others. Market data and indices under the previous data connectivity and indices segment have been split into two line items, namely market data and indices and others under this segment. So in short, platform and others will include revenue from EMC and Baltic Exchange and the membership-related fees that I talked about, on top of what was originally in the DCI segment. As a segment, it contributes 20% to group revenues, and you may refer to our financial results for more details on the restatement. But as I said, it is not a major change, but I think it better reflects the split between the transaction volumes and the non-transaction volume or the revenue streams in, in our business.
So the change, as you can see, is from the FICC, using the first half FY 2023 numbers. As a proportion, it is now 21% versus 27%, and Platform and Others grew from 13%- 19%. Nothing changes really for Cash and Derivatives, other than the movement of the membership-related fees. So now to the operating segments, based on what I've just described. Our FICC business, which accounts for 26% of our total revenue, grew 28% or SGD 33 million from strong growth in currencies and commodities. So I mentioned eighteen months ago that we expect this segment to grow at a mid-teens % range over the medium term, and based on the results so far, it remains on track to do so, even with the revenue classification. We saw growth momentum in our FX business, both exchange-traded and OTC.
On the exchange-traded side, we saw 24% growth in volumes, largely contributed by our CNH Contracts. As I mentioned earlier, OTC FX, the headline ADV was just above $100 billion, as we saw an uptick in client risk management activities. And our commodities franchise volume grew 48%, Iron Ore continues to be a standout performer as volume grew almost 50% year-on-year. And this is not due to any low base effects. In Iron Ore volumes in FY 2023 grew 41%. Now, moving on to Equities. So Equities cash revenue was down 6%, due to a decline in both trading value and the average fees. I mentioned SDAV declined 12%, and that was across the board, mainly driven by lower trading activity in the REITs and the small and midcap stock segments.
Clearing fee declined to about 2.47 basis points, as we saw higher participation from active traders and market makers. As for Equity Derivatives, revenue decreased or declined 7%, largely due to the 14% decline in total volumes. So Nifty was one. Nifty volumes was down 39%, lower on a year-on-year basis, and as we migrated our members and clients to GIFT Connect. So just to give you a sense, if we exclude Nifty, for this segment, the trading and clearing revenue would have been down 5%, and that would have been coming from our key, flagship contract as the A50, as there was weaker investor sentiment in that area. On a pro forma basis, the average fee per contract remained comparable at $1.54.
Moving on to Platform and Others, we saw higher revenue across the board from market data, connectivity, and also EMC. Indices revenue remained comparable. Moving on to Expenses, it's up 3%, to SGD 296 million. Staff costs was the main cost driver. It increased 10% or SGD 13 million. We had higher fixed staff costs from the merit increment, and also higher average headcount. We also saw a higher variable cost increase, but that's largely due to timing differences in how we accrue the bonus in the last FY. So simply put, on a full year basis, that would normalize, because the accrual was largely backloaded in the second half of last FY. Technology expense was up 6%, given some of our higher system maintenance for our OTCFX business.
We saw a decline in processing and royalties, largely due to the absence of Nifty royalties under the GIFT Connect partnership. We will continue to remain prudent in managing our costs. Having had a chance to relook at the numbers, we will therefore revise our expense and CapEx guidance for FY 2024. Expense growth in FY 2024 is likely to be similar to the 3% year-on-year expense growth that we have observed in the first half of FY 2024. This is lower than the previously guided mid-single-digit percentage range. As for CapEx, we anticipate it to be SGD 5 million lower, i.e., at SGD 70 million-SGD 75 million, compared to the previously guided range of SGD 75 million-SGD 80 million. Now, let me just do a reconciliation between the reported earnings and the adjusted earnings.
As you can see, the difference is largely due to the non-cash investments or adjustments shown in the red box. First, we saw a net fair value gain of SGD 35 million, and that came from our investment in a private equity fund managed by 7RIDGE, reflecting the continued strong operating performance of Trading Technologies, or TT. As that business has done well, our investment in that fund has been further revalued upwards by SGD 36 million. We previously revalued our investment outwards by SGD 40 million in the last FY, and this flows through our P&L, given its accounting classification. We also saw a weaker performance in Scientific Beta. Assets under replication has declined.
It is about SGD 45 billion in the first half of FY 2024, and that's mainly due to the lower performance of the factor-based indices, which has resulted in some shift in investor preferences as they turn towards alternative investment opportunities. Arising from this, we wrote back our forward liability and also recognized an impairment loss on the purchased intangible assets relating to Scientific Beta. The forward liability, which relates to a put and call option that we have with EDHEC, which is the other 7% shareholder in Scientific Beta, to acquire their stake, that value has come down, become lower, and accounting-wise, it's actually recognized as a gain. So we have adjusted that out. That's why you see a SGD 4 million adjustment in our adjusted earnings.
As for the impairment, we took a SGD 5 million impairment on our purchase intangible assets in Scientific Beta that relates to know-how and customers. So we also took an impairment of about SGD 8 million in the last FY. As for balance sheet-wise, continues to be robust. Moody's has reaffirmed our Aa2 ratings in November last year, which is the highest credit rating it has assigned to any exchange group. Leverage ratio remains healthy. Gross debt to EBITDA declined from about 1.1 times to 1 times currently. And in terms of debt maturity, we do have an existing convertible bond that is due in March 2024, and assuming it doesn't convert to equity, we will look at some form of refinancing.
The board of directors has declared an interim quarterly dividend of SGD 0.085 per share, so this will bring dividends for the first half of FY 2024 to SGD 0.17 per share, which represents an increase of 6%. With that, let me now hand over to Boon Chye, our CEO, who will deliver our business update.
A very good morning, everyone. Thank you for joining us. As Ng Yao Loong shared, our multi-asset strategy has enabled our performance to remain resilient in a challenging macro environment. We have been and continue to actively navigate global market uncertainties. IMF is anticipating a higher likelihood of a soft landing in the U.S., alongside a faster pace of recovery in emerging markets. We expect inflationary pressures to decline globally, which will in turn determine the level of fiscal support and rate cuts required to support a more balanced global outlook. Globally, markets are still adjusting to an environment with structurally higher rates. On top of this, higher geopolitical tensions have significantly impacted the economic outlook. Investor sentiment has thus been affected in many equity markets. Nonetheless, we believe that Asia continues to lead global growth, albeit at a lower growth rate than before.
China remains the world's second-largest economy. India has been one of the fastest-growing countries and is set to become the third-largest economy by 2030. There are also high-growth economies in ASEAN, like Vietnam and Indonesia, which could offer greater opportunities in the near future. SGX is in a strategically strong position with our unique offering of a single point access into Asia. Simplifying access for our international customers remain highly relevant and important. We continue to do so through our expanded multi-asset product suite, round-the-clock liquidity, and efficient market infrastructure. Our fixed income, currencies, and commodity business, or FICC, continues to grow. Year-on-year, its contribution to overall revenue has risen five percentage points to 26%. FICC revenue is on track to grow in the mid-teens % range over the medium term.
Our FX futures have benefited from the volatile currency markets and new clients' adoption on the back of widening rate differentials. Listed FX volumes in the first half of this year grew 24% year-on-year. We secured our market share and position as the primary venue for trading international RMB Futures or CNH. Volumes of our CNH futures almost doubled year-on-year to 15.2 million contracts. Open interests at end December stood at over 120,000 contracts, up 29% from last year. In notional terms, this translates to $12 billion. The robust growth in volume and liquidity shows that SGX is the preferred choice for trading and accessing international RMB, and we're confident it will remain this way. Besides our key CNH and Indian rupee contracts, we also offer a comprehensive suite of contracts across major and emerging market currencies.
Year-on-year, volumes have risen 80% for the Korean Won Contract and 46% for the Thai baht contract, albeit from a growing base. To capitalize on the opportunities in the current market environment, we plan to broaden our product suite to include interest rates derivatives. We are also pleased that our OTC FX franchise has grown to become one of the leading exchange-backed OTC platforms. In the first half of FY 2024, OTC FX average daily volume increased year-on-year by 46% to $100 billion. Our OTC FX ADV has consistently reached $100 billion in recent months, and we're confident of reaching our target ADV by FY 2025 or earlier, and to further drive higher ADV.
The strong OTC FX performance was in part due to the expansion of our customer footprint across Asia Pacific, U.S., EMEA, as well as the broadening of client segments and types. To better support customers, we continue to enhance our OTC FX platforms with new functionalities using data analytics and AI. Next, commodities. Price risk management for commodities has been crucial amidst current inflationary setting and geopolitical tensions. We saw a 48% gain in commodities volume year-over-year to 29 million contracts. This was mainly driven by a sharp increase Iron Ore volumes. In just two years, Iron Ore volumes have more than doubled. Screen trading has grown significantly to 60% of volumes. Notably, trading in non-Asian hours rose to 19% of total volumes as adoption by global clients increased.
The rising financialization Iron Ore is both the driver and outcome of a bigger and more diversified participant Iron Ore remains one of the best instruments as a proxy for Asia's growth. Iron Ore, our transport segment has also grown. We are a major clearinghouse for dry FFA futures and options contracts. Volume in freight derivatives increased 46% year-on-year. Our unique commodities offering enables participants to risk manage both cargo and freight on a single liquid and capital efficient venue. Moving on to our equity derivatives. Our equity derivatives portfolio stay resilient amidst a mixed regional equity market performance. Trading activity of our FTSE China A50 contract declined due to lower-than-market expectations of economic growth, which affected investor sentiments. Nonetheless, year-on-year, our market share remains comparable, and the contract is still the key Chinese equities risk management tool for global investors.
Open interest rose 16% year-on-year to over 930,000 contracts, or $11 billion in notional value, as customers maintain their positions with SGX. For India, we successfully launched full-scale operations of the GIFT Connect with open interest of more than $9 billion in July. In the last six months, our open interest has increased 7% to over 240,000 contracts, or $11 billion in notional value. We're now working to fully migrate our clearing members within the next few months. This will lead to higher end client activity, and we expect volumes of our GIFT Nifty contracts to normalize to pre-migration levels within the next 12-18 months. The GIFT Connect is the first of its kind financial corridor between Singapore and India. Together with NSE, we look to grow this unified liquidity pool.
Our cash equity markets continue to be influenced by elevated interest rates and weak market sentiments. This did not stop us from actively expanding our product shelf and network during the first half of the year. We achieved a milestone with the listing of structured certificates last August, the first in Asia to do so. Since then, we have listed more structured certificates on Asian blue-chip companies. In the ETF space, we continue to enlarge and broaden our shelf. Total AUM of ETFs listed on SGX has reached about SGD 11 billion. In the first half of FY 2024, we listed new ETFs headlined by two key initiatives. First, we collaborated with BlackRock to launch a landmark Climate Action ETF, the largest equity ETF in Singapore, with a record high AUM of $426 million at launch.
As at end December, the AUM has risen 10% to $467 million. This ETF is an extension of our collaboration with MSCI, with whom we launched the world's first shelf of Climate Action derivatives. Next, following the successful launch of 4 ETFs under the ETF Link with Shenzhen Stock Exchange, we further strengthen our connectivity with China by launching the first pair of ETFs under our link with the Shanghai Stock Exchange. Building on our Thailand-Singapore depository receipt linkage, the DR of Singapore Airlines commenced trading in Thailand in September last year. Trading activity of the Singapore DRs of the 3 blue-chip Thai companies listed on SGX in May last year has grown steadily among the investors here.
SGX and SET are working closely with the brokers and partners to grow the ecosystems for DRs, and we're building on the momentum to add more Thailand and Singapore companies to the link. Looking ahead, 2024 could see another year of uncertain economic backdrop. While interest rates are starting to stabilize and possibly decline, geopolitics will continue to dominate and could dull economic growth globally. This could affect market sentiment and risk appetite. There will be a record number of elections in major markets this year, which could lead to some volatility in the markets. We're cautiously optimistic that investors will turn to our derivative suite to manage portfolio risk. Notwithstanding external factors, we will forge ahead with our plans to strengthen our multi-asset offering and network.
First, we will expand our product suite, including interest rate derivatives, that can complement our multi-asset offering and offer clients another growth opportunity. We'll also drive the adoption and growth of our emerging products. Second, we are enhancing our distribution capabilities by expanding our customer outreach and targeting new customer segments. Third, we are evaluating our options to best position our index business in the broader index ecosystem. This business remains strategically important to SGX. This brings me to the next point on collaboration. We'll strengthen our existing partnerships and look to form new strategic collaborations to enhance our competitiveness and expand our network. We believe that by working together with our partners, we can create synergies and complementarities that can benefit our clients and the ecosystem. Even as we push for growth, we will be prudent in managing our expenses and capital expenditure.
Full year expense percentage growth will likely be similar to the first half, 3% year-on-year expense growth rate. FY 2024 CapEx is expected to be between SGD 70 million-SGD 75 million, lower than our previously guided of SGD 75 million-SGD 80 million range. Overall, we will maintain our dividend growth guidance of a mid-single digit percentage increase in CAGR growth in dividend per share over the medium term. With this, I conclude my presentation. Thank you for your attention, and I invite my colleagues to join me for the Q&A segment. Harsh?
Hi, thanks for the presentation. Capital management, how do we think about the dividend, the mid-single digit growth, Boon Chye? Because there is a lot of capital, in terms of payout ratio has gone lower over a few years. Your M&As have been good, but bite-sized, nothing big. So why not scale up payout? Why wait for full year? What was the thought process, and how do we- why just mid-single digit? Why not something bigger, something more consistent? That was the question. Thank you.
Well, we have stated, I think in FY 22, aiming to grow our revenue in the high single digits, expenses in the mid-single digit, and thereby leading to a growth rate closer to a high single digit in the earnings per share. And we would like to then obviously increase our dividend pay growth rate, which we did. And we said growing in the mid-single digit target growth for medium term. And I think looking at the opportunities, notwithstanding the cycles to go through, our belief, as I said, is Asia continues to lead global growth. We have now, in the last five years, fully broadened the asset classes.
We still see opportunities organically, and as and when there are other opportunities that we can acquire, and then meanwhile, we'll continue to pay our shareholders with a growing dividend rate. I think that it...
Hash, you're gonna follow up?
No, no, I hear you, sir, and I, I understand that.
Mm.
But, what's stopping you from increasing the payout? Like, what kind of buffer do you need, and how do you think about the use of that buffer over, let's say, next couple of years? Because if I look at last five years of track record, there's been no billion-dollar acquisition, right? There's been a lot of these smaller, good acquisitions, but smaller. So is it more of the same, in which case the buffer is kind of becoming bigger? Or do you think you can do something much bigger and hence you are building, and hence the payout has been in closer to 80% for a while?
No, I understand. I think it's hard to tell what particular inorganic opportunity could come out. And I think it's not about a buffer, as you talk about, why try and retain a buffer. I think what is more important is we see opportunities organically and potentially we can bolster that. But you can't tell what come, what quite come next. But I think what's important is we see our positioning very well, establishing the ecosystem with our clients, with our participants, and we like to grow rather than creating no flexibility at all.
Okay, and sir-
Harsh, I think-
Yeah
... just to add on, I mean, this capital management question, I know you have been asking us quite some time. It is an evolving thing, something that we look at regularly. It's not a static, and we decide, and then it doesn't change. So it's something that the board and management team are very focused on. The question is really whether we have better use of the proceeds or we can distribute to shareholders. And as Poon Chun has articulated, we hold a certain view at this point. But again, this view is regularly tested, and then if there are changes or if we feel that it is better to be distributed to shareholders, then we will certainly, we can certainly make that change and call.
At this juncture, I think, we have the belief that, we can certainly use the proceeds, strike that balance between returning that to shareholders, and then leveraging frankly on our balance sheet, which does provide that capacity if such M&A opportunities arise.
Thanks. Yeah, no, that's useful. Organically, in terms of the capital that you need for the clearing fund, both derivatives and equity, do you see the need to increase the fund organically? Do you see significant delta? Some of the contracts have done really well, including FX. But over the next couple of years, do you see a step change in any of these contracts where you'll need much bigger clearing fund on any of the businesses?
I guess the answer to that is, I hope so.
Yeah.
But in any reasonable set of scenarios, we have significant internal efficiency still, due to portfolio offsets. That mean that the way we've currently sized it is very, very ample. It's best in class amongst all clearing houses. So the way we size it is we do make a commitment that as the use or the leaning on that fund grows, we will also commit to growing with that fund. So no expectation of step change, but if it does happen, we're financially ready, and it would be very good news.
Right. So, the reason I've asked that, Mark, was to understand whether it's more organic or inorganic yield. It kind of seems like the excess capital is probably going to be used inorganically. So that was-
Harsh, maybe I can just also add on. I think as we grow our business, I think we did adjust our clearing fund outwards to reflect the growing open interest. That's also the support that GIFT Connect as well. So I think that's a reflection of the growing diversity and broadening of our clearing business.
... capital is not just kept for clearing fund, because we do want to make sure we have a significant stake together with our stakeholders in the mutualization of risk. We also keep capital or liquidity for operational to meet certain other risks as well. So typically, I don't think you'll be surprised that clearing houses or exchanges keep 6-9 months of liquidity, 6-9 months of operating expenses as liquid resources, right? So those are good practices. And fundamentally, we are built on trust and confidence in the creditworthiness of our clearing house. We maintain buffers such that clients have the confidence to leave their overnight interest, and that's where we can grow our business. So that's part of capital management.
It's not just clearing fund, but also the ability to maintain liquidity, to meet certain, potential risk events. And that's where I think Moody's are comfortable with our risk management practices, the levels of liquidity and capital that we keep, and that's why we are rated Aa 2.
No, definitely, that's great.
Yeah.
Final question from me on something different. Depository receipts listing in SGX, there are a lot of markets, especially in our part of the world, which are not as liquid, and they don't have as much access to capital. So you're doing couple of markets like Thailand. Over the next couple of years, do you see that broadening meaningfully, adding more, especially some of the smaller ASEAN markets in terms of DRs listed in SGX?
Yes, we would like to. I think, to us, it's a win-win for both markets, for the broader ecosystem, for participants in each market. Participants in each market get to trade within the ecosystem that are familiar with, and in some cases, currencies that are a little bit restricted, but yet they can access foreign company listed there. Step one is really to try and assess what are the regulatory differences between countries and try and narrow as much of that, such that we can have a robust governance structure for investors. Our intent is to partner with more markets around the region.
Any discussions with any markets that you can talk about or too early?
ASEAN is the fourth largest economic bloc by the end of 2030. So that's within the Asia, that's leading global growth, so...
Great. Thank you.
Yeah.
Okay, well, maybe Nick, and then, we take one or two questions from online and come to you.
Okay. Thanks very much. It's Nick Lord from Morgan Stanley. I just wonder if you could talk a little bit about China growth?
Sorry, about?
China growth.
China, yeah.
And we've clearly seen an impact in the A50 future volumes, I think from what's been happening in the China equity market. Obviously, you've got another couple of contracts with a link to that, which Iron Ore, and also, I guess, with CNH. So if we do see continued slow growth in China over the next 12 months or so, I just wonder how you would see those contracts trading and any risks to the growth you've seen, particularly in Iron Ore.
So, index levels have come down, economic activity has come down. But our franchise, I think if you've looked at the numbers over the past five, 10, 15 years, we are not directly correlated to just index levels. Perhaps five, six years ago, when we asked this question about, are we too concentrated in China? The answer then was, we have a full China waterfront, and people use us for risk management, not necessarily just for investment. So if you look at the China-linked products which we have, which is multi-asset class, Iron Ore in particular, and A50, the open interest on A50 has actually gone up because futures are an instrument where a long meets a short. So in many ways, our franchise isn't dependent on whether the index goes up continuously.
It is dependent on the need for risk management, whether there's uncertainty, jump events. And in the equities market, as we know, in the past 12, 18 months, there's been a period where it's just deflated, but this will not persist. I mean, markets don't behave like that. You can see this in the other two products, which have seen record volumes and open interest, RMB Iron Ore. so in totality, the China waterfront has seen more usage and not less usage. We're pretty calm about the fact that index levels are coming down, because actually the implication for the rest of our franchises, we're not a China shop, right? We're a Pan-Asian shop. India is now 16%, the second largest component of emerging markets. We've got the top three, China at 26%, India at 16%, Taiwan at 16%.
Three of our major equity derivative contracts covers the idiosyncratic elements of emerging markets, and in many ways, we're in a healthy position now.
Thanks very much for that. Just following up Iron Ore, and I'm just trying to understand. I mean, obviously, there's been huge growth in financialization, as you pointed out, is a large part of that growth in Iron Ore.
Yeah.
I guess it's been reasonably helped by the fact Iron Ore, as a commodity, has still held up and there's still demand Iron Ore. but if that were to change going forward, do you think the financialization of the market is enough to sustain volumes, or would it inevitably take a hit if the underlying became less active?
One element would be the fact that the unexpectedness of the behavior Iron Ore has led to some short-term boost. But if you look back 2 years, this growth has been consistent. As Yaolong mentioned earlier, we're seeing very significant double-digit growth from a high base. Our feeling is that we have crossed a rubicon in terms of whether financialization is happening or not. I think that that's Iron Ore, in our view, is now in a category which is very similar to the handful of other financialized commodities, oil, gold, where it is a 24-hour macro variable, which is of significant importance to every portfolio.
Because of that, we foresee that the natural evolution of this contract is higher ratios of screen trading versus perhaps the physical market, because people now realize that there are many other things in your portfolio which have Iron Ore element. You own some mining stock, you own some mining options. The categories of things that we can do Iron Ore, in derivatives format, include curve-related products, such as freight or higher or lower Iron Ore, and particularly options. So the growth isn't bounded by any sort of near-term constraints to do with physical price formation. It is now properly a financialized product.
Cool. Thanks.
Thank you. Maybe one quick question online, and then we'll come to you. Yeah.
So a question from Phillip Capital. What supported the growth in your OTC FX business? Was it market share gains from other platforms? Can you elaborate?
Yeah. I think on OTC FX, I think we are excited about, you know, the opportunity. I think we have articulated this quite a few times. I think three main very interesting trends for us. One is FX is a huge market, $7.5 trillion. We think that around a third of that, right, are basically participants using similar platform that we have, so around a $2 trillion market. So I think one is that as the market becomes more digitalized, when people look to more improve the efficiency of how they execute, how they seek out best pricing, I think there's a macro beta to that around more electrification.
Two is that, I would say that something that we have done well is, I think, how we differentiate in facilitating clients to source for liquidity, especially in more liquid market. So while we are international platform, you know, with the dominant volume that is flowing through in G10 liquid currency, but within that whole EM Asian space, we are the market leader, right? As I think market becomes more volatile, right, as you see a slowdown in monetary cycles, in developed countries, and the differential is starting to filter through to EM, we are seeing a lot more EM currencies. And in times of, I think, uncertainty, you also find that there's a lot more usage for our platform.
So definitely, I think in terms of the market share aspects of things, I think that there are some gain that, you know, we have seen to that. So I think in all, you know, when we think about you know, what the outperformance, SGD 60 billion-SGD 100 billion that we have on a year-on-year basis, I think definitely, I think there's a part where the market continues to adopt more technology in terms of how to execute. There's also a bit around as Asia FX outgrow global FX, just in terms of, you know, trade, GDP growth, and requirement for FX. I think that there's also some positive uplift that we get.
The third piece, I think that is becoming very relevant is that finally, no more zero interest rate, right? So and that whole interest rate cycle, interest rate differential, I think beyond FX, what we also provide is also a leading electronic way for people to efficiently manage their interest rate differential risk, their FX swap risk. So within that, we have also seen a massive growth within our volume in the swap volume that we see, right? So apart from FX, when we think about just spot volume, I think that whole interest rate differential, the need for people to more actively manage, right, their short-end interest rate differential risk, especially when they have cross-currency exposure, that is also a big driver for that. So I would say that there are three components of where we see the volume.
Can we have the mic there, Dylan?
Hi, I'm Dylan from Maybank. A couple of questions from me. How is the whole GIFT Connect going? What's actually going well, what's actually not going as well as planned, particularly from the context, you know, you've got a very long runway of 12-18 months for volume normalization. Why is it taking so long?
So it's going very well. Part of this is by construct and design. Part of this is just... I mean, this is the sweet spot for market access to India right now. That's not changing. We have ported over effectively more than 100% of assets compared to when we jumped off, and a lot of that's due to new inflows into India. A lot of that's due to the increase in notional of the index. So the open interest has actually gone up. We've hardly ever seen such a high open interest. In terms of the quality of trading, the market quality in GIFT, it's very, very high at this point in time, because almost all of our customers, in fact, close to 100%, are buy side, real users. Very high ratio of open interest versus volume.
The reason we have some confidence that in the next 12, 18 months, we'll also see the volume kicker is because we need to onboard still some of the more slower moving, but high impact customer segments. These would be the electronic traders. They're taking a longer time to set up there, because more physical infrastructure needs to happen there, more capital needs to be put at work, more OpEx capital. And we have direct visibility, name by name, clearing member by clearing member, as to what their onboarding time is. So when those guys come in, you've seen the effect before, right? Every lot of real money business leads to three, four times turn when you get the right kind of trader in there. So when that happens, I think you will see, you will see the boost.
Again, it just bears repeating, I've never seen such excitement and interest in portfolio structuring when people think about: What do I need to do structurally for my India portfolio?
Okay, thank you. Second question, Yao Loong, maybe you can answer this one. Your CapEx guidance has been lowered. Where are some of the CapEx savings coming from?
So part of it came from actual savings. In doing the project, we spent less than what was budgeted. And then there was another part where we took a critical review of the list of spending. Do we need to spend? I mean, that was the question asked. And we decided that there were some projects that we could defer without clearly compromising the resilience and the business proposition that some of these investments were meant to make. And as a result, collectively, we saw that we could save about $5 million of CapEx for this year.
So can some of that come back, the following year, or?
Well, I mean, the projects that have been deferred, clearly, I guess, in terms of priority, are not sort of top of mind. We can always find... we will always review this list, and if we decide we need to spend, and there's a clearer business proposition in terms of either savings or revenue, then I think, we will then make the judgment. But again, these things are always done on an iterative basis, right? As we approach the end of this financial year, we are again looking at what we need to spend in the next three years. So no different from corporate's planning process. This is an evolving list. I mean, the most important thing is, as a portfolio of expenditure, are we getting the rate of return, given that we are spending this amount of money to try and drive the business growth?
Thanks. We have one question online, and then I think there's a hand here. Yeah.
Okay. So we've got two questions from, Goldman Sachs. The first one is, can you give an update on your paper physical ratio Iron Ore? and the second question is, Hong Kong gained some market share in the CNH Contract. Although SGX is still the dominant player, what is SGX doing given the market share decline?
So the-
So-
Oh, sorry. No.
Go ahead. Go ahead.
The ratio is. It's been ranging 2-2.4. It's significantly higher than 1, which is usually the breakthrough ratio for financialization. If you compare to oil and gold, those are significantly higher, double digits.
Yeah, on-
So-
... on FX, I think, it is, it's exciting for us. I think the key point is that, same time last year, total market CNH 10 billion. Today, we are at CNH 20 billion. At CNH 20 billion, we are top two, top three, FX traded futures in the world, so slightly below euro-dollar. Sometimes we are bigger than yen, sometimes smaller, but not far away. So, I would say that, and clearly, I think we continue, you know, to have the dominant market share. The OI, volume that we have ranges 79%-80%.
And I think definitely, you know, while Nick, you mentioned about, you know, the uncertainty in China, definitely I think we have seen that uncertainty also create more opportunities and more requirement for people to more actively manage their risk, their risk, right? As a result of, I think, CNH becoming a CNH 20 billion daily volume traded volume asset, we're actually seeing a lot more interest in different types of participants coming into the market. Clearly, I think we expect that, you know, as CNH futures become a recognized venue for liquid market risk, this price discovery not only in futures but also in OTC, given the size and the fact that we are 24 hours.
I think that it's also important that we are then starting to see more users, especially Tier 1 banks, people who usually only trade OTC, having to then come into the market because this is becoming a key place where price is discovered. I think what is also important for us is that CNH is not our only FX product, right? We have a whole portfolio of risk management solution for people to access the market. And as Boon Chye briefly mentioned, I think apart from the growth in CNH, over 40%, you know, we're also seeing massive growth in Korean won, right? 80%, we are seeing growth in Thai baht. So really, I think that, you know, I think one is that it's—we are the dominant player. It's 79%-80% of OI, primary place that price is discovered.
CNH has become relevant for people who are coming and trading that currency. I think we are seeing more adoption. For the people who are using that contract itself, they are now looking at, if I'm doing the SGX CNH, I also—I should also look at INR, right? Our Indian rupee, where we are 75% of market share, where we are the leader. And maybe I should also look at Korean won and the rest of Asia, so that I have a very efficient way of managing my risk, but also have all the different portfolio efficiency offset.
And maybe if I could add, as Beng Hong said, the overall CNH market has grown. Our absolute share of the volume is higher, but I think what's more important is CNH is part of our broader China offering. There's INO, there's A50, and then CNH is also part of the broader listed FX derivatives, as Beng Hong said. Our CNH Contract is the top three listed FX futures globally. It's the largest international RMB Futures traded globally. And then, I think also importantly, we are having a larger expanded liquidity pool between listed FX futures and OTC FX. So I think we are poised to continue to serve our customers even better.
Maybe, Gurpreet, just to ground this in infrastructure for CNH, volume market share is important-
Yeah.
But open interest market share is something you ought to look at. I know you watch both exchanges very closely. Do remember that we are today the world's largest RMB clearinghouse outside of China, because of CNH. This open interest means that we have a considerable pool of CNH as collateral.
Mm-hmm.
So as we pave the way towards offshore RMB being one more currency that members, especially many of our Asian members, are using as collateral, that should point to the fact that our CNH is qualitatively different in its construct versus the many other CNH futures out there.
Yes.
All right. Thank you for the presentation. I'm Jovi from The Edge Singapore. Just a couple of questions here on equity. So, SGX updated its listing rules last August for life sciences companies to list, without, even if they don't meet certain requirements. How has feedback or response been for this? Are you still courting any life sciences companies for an equity listing? And also, would there be plans to also bend the rules to welcome other specific sectors, and which sectors in particular? Thanks.
So, I mean, I would say feedback on that has been overall positive. You know, one of the reasons behind this is to make sure that we're globally competitive, when you look at us, and our rules and frameworks relative to others, globally, as well as here in the region. So there's now a recognition that for these type of companies in the life sciences space that are even pre-revenue, that they can come to us. You know, in the end of the day, for the listings of these type of business, you also need a conducive IPO environment, and that's a broader topic. But we are positive that as we get into an environment, where sort of IPO activity comes back, that we'll see some of these companies come through as well, yes.
Any-
Sorry, there's 2 more here. And also, any sectors you would like to apply this to as well in the future?
I would say if you look at our current frameworks and regulations, extremely comprehensive, and I don't think we need to do anything specific to attract broader businesses, right? So, and this has been in place for a long period of time. Pre-profit companies can come, high growth companies can come. We can do dual class shares. So I think if you look at our overall suite of frameworks and policies, it's pretty comprehensive.
Mm-hmm. All right. Next question, I think on the outcome of the three SPACs here, could anything have been done differently, in your opinion?
Well, I would say if we go back two years, we would have hoped that we were in a different position now. But a lot of that, or pretty much all of that, is just down to timing and market conditions. I would say we make these decisions not based on one cycle. We make these decisions for the longer term. Can we see a scenario where SPACs will come back in the next five years, 10 years? Perhaps. And now we know that we can deliver them, that, again, the frameworks and the policies work, that the infrastructure required for that works. You know, again, for a good de-SPAC, you also need a conducive IPO environment, and clearly, that hasn't really been there in the last two years.
The SPACs, by design, offer an off-ramp when the sponsor cannot find a suitable de-SPAC target; there is a route in which they, through which they can return money to the shareholders, and that has happened in two of the instances. So I think, you know, we know that the structure works, but the market conditions need to be there, of course.
Thank you. Sorry, just one last question here.
Thanks.
At the previous results, management said-
Maybe last question from you?
Yeah, yeah. Yeah. So management said it targets to deliver high single-digit revenue growth in the medium term. This was the last results. Is this still on the cards? Are there changes to this, like how expenses came in lower than expected?
It's our aim to grow our revenue in the high single digits. Obviously, we're medium-term, and what's also important is still in the context of the macro environment that in with a diversified multi-asset portfolio, we have been able to ride through the cycle. I think we have one more question from-
Yep
... online.
So there's a question from Bloomberg: You mentioned that you're enhancing your distribution network. Could you expand on the new customer segments that you can potentially target? And is there any countries that you are targeting in particular?
... There are still quite a bit of areas we can grow in our distribution. I think it's across the globe. I think clearly within Asia Pacific, with a established network that we have, I think we can go much deeper with our customers to serve, serve them better. There's obviously pockets of our expansion in EMEA in Europe, that we're seeing in parts of the Middle East. And then obviously, in the U.S., it's a large segment of broad buyside that I think we could cover them and expand our product distribution to them.
One thing that we see very clearly, and this is particularly in the derivatives space, that the broader the product offering is across asset classes and the more volumes that we accumulate in the T +1 sessions, this does attract more engagement from from investors both in the U.S. and in and in Europe. And we're seeing that. We're seeing that in our volumes, and that is sort of a snowball effect. Two other aspects to that as well, on the membership side, we're seeing a number of new members that come to us with more global profiles, including China. In the last couple of years, we've seen a number of brokers come become part of our membership from from China origin.
We're seeing a couple of them coming to us from the West as well, and so that is encouraging. And then the last sector, more in here in the region, and that comes down again to the DR links and other efforts that we're doing to engage more of the retail participants, not just from Singapore, but also from the countries around us, which are attracted in to broader product offering, especially also what we're seeing with the growth in the ETF space.
All right. Thank you, all. We're slightly past 10 now. Thank you for all your participation. Have a good day.