SGX's Strategic Resilience: Geopolitical Shifts and Tax Incentives Fuel Market Turnover and Expansion

In an era of escalating U.S.-China trade tensions and shifting global capital flows, the Singapore Exchange (SGX) has emerged as a strategic linchpin for Asian capital markets. With a 11.7% year-on-year net revenue surge to S$1.298 billion in FY2025, SGX's financial performance underscores its ability to capitalize on macroeconomic volatility. This growth is not accidental—it is the result of a calculated strategy to leverage geopolitical dynamics, tax incentives, and regional expansion to attract listings and trading volumes. For investors, SGX represents a compelling long-term opportunity, blending financial resilience with forward-looking innovation.

Geopolitical Tensions as a Catalyst for Listings

The U.S.-China trade war has created a perfect storm for global capital markets. As Chinese and Hong Kong-based firms seek to diversify their funding sources and mitigate U.S. regulatory risks, SGX has positioned itself as a neutral, stable alternative. At least five Chinese energy, healthcare, and biotech firms are actively planning IPOs, dual listings, or share placements on SGX within 12–18 months. This trend is driven by the Trump administration's 145% tariffs on Chinese goods and the broader uncertainty surrounding the Holding Foreign Companies Accountable Act, which has pushed S-Chips to seek safer havens.

SGX's CEO, Loh Boon Chye, has highlighted a “pipeline of over 30 companies” preparing for listings, a figure that reflects both domestic and international demand. The recent $773 million IPO of NTT DC REIT—Singapore's largest in eight years—signals a revival in high-profile listings. For investors, this pipeline suggests a near-term boost in trading volumes and market depth, particularly in sectors like technology and green energy, where geopolitical tailwinds are reshaping supply chains.

Tax Incentives: SGX vs. Hong Kong

While Hong Kong remains a traditional listing hub, its attractiveness has waned due to political instability and regulatory crackdowns. In contrast, Singapore's 2025 tax rebate of 20% for primary listings, coupled with a S$5 billion government program to deepen domestic investor bases, has made it a more appealing destination. SGX's tax incentives are part of a broader strategy to offset Hong Kong's structural challenges, including a 30% decline in IPO volumes since 2020.

The exchange's financial incentives are complemented by regulatory clarity. Unlike Hong Kong's opaque political environment, Singapore's neutral stance and robust legal framework provide a stable backdrop for capital raising. For example, SGX's streamlined cross-border IPO processes and RMB-denominated instruments have lowered barriers for Chinese firms. Meanwhile, Hong Kong's two-tier corporate tax system (8.25% on first HKD 2 million, 16.5% thereafter) lacks the same level of targeted support for innovation-driven sectors.

Regional Expansion: Tapping ASEAN's Growth

SGX's regional expansion strategy is another key driver of long-term value. The Singapore Depository Receipts (SDRs) program, which allows overseas companies to list on SGX, is expanding into Indonesia and Vietnam. This move taps into ASEAN's $4 trillion GDP and growing middle class, with Indonesia's market alone projected to grow at 5% annually. By 2026, SGX plans to launch SDRs for Indonesian assets, further diversifying its revenue streams and reducing reliance on domestic equities.

The exchange's geographic positioning also benefits from its role as a bridge between China and Southeast Asia. As Beijing deepens economic ties with ASEAN, SGX is well-placed to capture cross-border capital flows. This is evident in the 28.5% year-on-year increase in OTC FX average daily volume (ADV) to US$143 billion, driven by demand for currency hedging and trade finance.

Financial Resilience and Cost Discipline

SGX's financial performance in FY2025 highlights its operational efficiency. Despite a 20.4% decline in treasury and other revenues, the exchange's diversified model—spanning equities, derivatives, and FICC—ensured profitability. Cash Equities revenue grew 18.7% to S$392.7 million, while FICC's OTC FX segment surged 25.3% to S$113 million. Total expenses remained stable at S$555.3 million, with adjusted expenses rising just 1.6%, demonstrating disciplined cost management.

The exchange's reinvestment in digital tools like BidFX and MaxxTrader further strengthens its competitive edge. With S$90–S$95 million allocated for FY2026 technology upgrades, SGX is positioning itself to handle higher trading volumes and attract institutional investors.

Investment Thesis: A Long-Term Play

For investors, SGX offers a rare combination of macroeconomic tailwinds and operational excellence. Its ability to adapt to geopolitical shifts—such as the U.S.-China trade war—while maintaining cost discipline and expanding into high-growth regions like ASEAN makes it a resilient long-term play. The 20% tax rebate for primary listings and the Equity Market Development Programme (EQDP) are designed to boost liquidity, particularly in small and mid-cap stocks, which could drive broader market participation.

However, risks remain. Hong Kong's deep capital markets and established IPO infrastructure could challenge SGX's momentum. Additionally, global macroeconomic headwinds, such as inflation or a U.S. recession, may dampen investor appetite for risk. That said, SGX's diversified revenue base and strategic initiatives—such as its SDR expansion and AI-driven trading platforms—position it to outperform in both stable and volatile environments.

Conclusion

SGX's FY2025 results and expansion plans paint a compelling picture for investors seeking exposure to Asia's evolving capital markets. By leveraging geopolitical tensions, tax incentives, and regional growth, the exchange is not only defending its market share but also redefining its role as a global financial hub. For those with a long-term horizon, SGX represents a strategic bet on Asia's next chapter—one where stability, innovation, and geopolitical pragmatism converge.