By David Fickling and Andy Mukherjee

(Bloomberg) — What does Singapore’s bourse hope to get out of its takeover of the Baltic Exchange?

On the face of it, loads. Faced with stagnating revenues from its securities enterprise, Singapore Exchange has been seeking to diversify its income base. But since its try to buy Australia’s ASX was blocked by that nation’s Treasurer in 2011, its solely accomplished takeover has been the city-state’s energy-trading platform from the federal government in 2014.

Year Baltic Exchange was based: 1744

There’s additionally a geographic logic. Singapore is the world’s busiest container port after Shanghai and a significant hub for buying and selling most of the commodities that fill the holds of the globe’s delivery fleet. One-third of the world’s traded items go by the Straits of Malacca and Singapore. Could there be any higher place to situate the worldwide shipbroking trade’s central clearing home?

Sadly, that ship has sailed. Founded in a Threadneedle Street espresso home in 1744, the Baltic has lengthy ceased to be a central buying and selling node. Despite the “Exchange” in its title, lately it’s extra of a market-information service, producing an array of indexes such because the Baltic Dry to assist members work out a good worth for transporting cargo. Most of the particular alternate takes place over-the-counter, between shipowners, charterers and brokers. Revenue final yr was a mere 6 million kilos ($8.8 million), with internet revenue of 1.3 million kilos for the delivery trade gamers who make up the Baltic’s shareholder base.

Singapore Exchange’s personal internet revenue final yr was S$349 million ($253 million). The Baltic Exchange’s paltry income will barely transfer that needle.

The actual query then is, why is SGX, because the bourse is understood, permitting itself to get distracted by what’s at greatest a trophy buy?

What Singapore actually wants is an honest-to-goodness marketplace for equities that may as soon as once more excite each its getting old inhabitants and international firms on the lookout for knowledgeable worth discovery and superior worth addition.

Both are daunting challenges. Singapore’s IPO market final yr was the quietest since 2001. Meanwhile, town’s investing public has been bruised as soon as too typically. Mainland Chinese shares have shed greater than half their worth on the SGX over the previous decade, even because the Hong Kong inventory alternate’s Hang Seng China Enterprises Index has risen 31 p.c in U.S. greenback phrases.

Whatever confidence remained went out the window following a penny-stock scandal in 2013. Incidents of market abuse proceed to canine SGX, as do worrying lapses in governance at a number of the city-state’s firms. The alternate’s each day turnover has averaged simply S$1 billion thus far this yr, down 25 p.c from 2011. SGX’s working revenue final quarter was principally flat from a yr earlier at S$102.6 million, with derivatives accounting for about two-fifths of it.

Baltic is healthier seen as a financial-information supplier — the kind of enterprise in opposition to which Bloomberg LP, writer of Gadfly, competes. (Baltic’s CEO is a former Reuters government.) The potential deal extra carefully resembles General Atlantic’s buy of a majority stake in commodity-price information service Argus Media, a transaction that valued the goal at nearly 1 billion kilos.

Chasing an info service may recommend SGX is getting disillusioned with these old school issues known as shares and bonds. In the previous 4 quarters, solely about S$29 million of the alternate’s capital expenditure has gone into the securities market, in accordance with knowledge compiled by Bloomberg, in contrast with greater than S$50 million spent on derivatives.

The argument that the island-state’s maritime heritage makes it a pure house for issues just like the Baltic Dry Index can be spotty. Even inside Singapore’s at the moment comatose securities market, mariners aren’t getting a re-evaluation. Fewer than 12 million shares and trusts linked to the delivery trade have modified palms on common this yr, down 41 p.c from 2011.

On nearer inspection, SGX could be shopping for a flashy London handle. Shareholders who have gotten little or no from the inventory over the previous 5 years besides a juicy dividend yield would have most well-liked one thing extra substantial.

This column doesn’t essentially mirror the opinion of Bloomberg LP and its homeowners.

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