SINGAPORE (Feb 19): Jefferies is maintaining its "buy" on Singapore Exchange with $8.00 target price as it welcomes a new suite of Nifty-linked products that will be launched by the bourse.
See: SGX to list Nifty successor products by August
On Monday morning, SGX announced it will be listing successors to the Nifty product suite before August and more details on these products will be available by March.
"Despite the uncertainty, these announcements suggest that new products are in the works," says analyst Krishna Guha in a Sunday report.
Following the joint press release of the three Indian exchanges to restrict accessibility to the Indian equity market on Feb 9, index provider MSCI says it is closely monitoring developments related to these anti-competitive measures.
See: India's NSE seeks SGX to delay stock futures
According to MSCI, the breadth of the restrictions announced by the Indian exchanges is "unprecedented in any equity market in the MSCI Emerging Markets Index series".
While still evaluating the potential impact, MSCI has strongly urged the Indian exchanges and their regulator, the Securities and Exchange Board of India (SEBI), to reconsider this unprecedented anti-competitive action.
SGX's morning update suggests that a new set of products are in the works with definite timelines. In addition, it seems to address concerns of all stakeholders while maintaining clearing status of SGX.
"That said, we await for more information regarding product characteristics, taxation regime, ID requirements, licensing fees, etc," says Krishna, "MSCI response suggest a rethink by all parties involved and stops short of any drastic measures."
Since the Feb 9 close, open interest of near month contracts has declined steadily from 402,000 contracts to 375,000 on lower volumes.
Jefferies estimates the Nifty family of products contribute about mid to high single digit percentage of SGX earnings. SGX Nifty futures accounted for 12% of total derivatives trading volume as of 1H18 while derivatives accounted for 40% of revenue for 1H18.
If the trend persists and contracts are not rolled into next month, near term earnings may be impacted even though new products offset impact in the medium term, says Jefferies.
As at 12.37pm, shares in SGX are up 21 cents to $7.58 or 21.7 times FY18 earnings.
