SINGAPORE (Sept 18): RHB is maintaining its “buy” call on Singapore Exchange (SGX) with a target price of $9.00.
The research house believes that despite a flattish July and August securities average daily value (SADV), the outlook for SGX seems positive.
The SADV for July and August was $1.18 billion, a slight increase from $1.12 billion in FY17.
In a Monday report, analyst Leng Seng Choon says, “We believe recent market expectations of US Federal Reserve delaying future hikes for Fed Funds Rate (FFR) – with only 47% of market players forecasting another FFR hike by Jan 31, 2018 – could stimulate equity markets and raise SADV in subsequent months.”
SGX’s SADV for FY19 is expected to be even stronger at about $1.39 billion.
In July, SGX announced a market trading break from 1200-1200 hours and changed the minimum bid size for securities in the $1.00 to $1.99 range.
This will be effective from Nov 13 and come on the back of market feedback and public consultation.
The analyst views SGX’s responsiveness as positive.
China’s A50 Futures’ average daily volume (ADV) for July and August was 269,000, a slight decrease from 281,000 reported in4Q17.
“There has not been any significant volume pick-up since the commencement of the Shenzhen-Hong Kong Stock Connect in Dec 2016, but we believe volumes could trend up over the next few quarters,” says Leng, who also assumes a pick-up in derivatives ADV to 794,000 in FY18, compared to 697,000 in July and August.
“SGX also offers an attractive FY18F dividend yield of 4.5% (FY17 of 3.8%), higher than the Singapore sovereign 10-year bond yield of 2.0%,” adds Leng.
As at 3.13pm, shares in SGX are trading 7 cents higher at $7.49 or 7.3 times FY18 forecast earnings.
