RHB Group Research is keeping its ‘buy’ rating for Singapore Exchange (SGX) with an unchanged target price of $11.60, as its Singapore research team is confident that trading momentum will keep up for the rest of FY2021 ending June.

“Both securities average daily value (SADV) and derivatives average daily volume (DADV) saw q-o-q improvements in 3QFY2021 ended March despite the y-o-y normalization from the 3QFY2020 high base,” the team writes in an April 19 research note.

Total equity trading value and SADV during 3QFY2021 came in at $94.2 billion and $1.52 billion which were 7.1% and 5.6% lower y-o-y respectively.

“The y-o-y normalization is within our expectation as the market experienced extreme volatility during 3QFY2020 (onset of the pandemic). That said, we are encouraged to see SADV picking up 18% q-o-q,” the team says.

The Straits Times Index (STI) also advanced 10% during this period, outperforming regional peers.

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9MFY2021 equity total trading value and SADV grew y-o-y by 7.9% and 8.4% at $256 billion and $1.35 billion respectively, making up 76% of RHB’s full-year forecast of $335 billion total trading value.

For derivatives trading, y-t-d DADV was 6% lower y-o-y as record volume contracts were traded due to the outbreak of Covid-19 in March 2020. However, 3QFY2021 DADV was 19% higher q-o-q.

“We expect the active derivative trading to sustain on global uncertainties (resurgence in other countries and US-China tension) and MSCI Singapore rebalancing. SEA Ltd is expected to be included in MSCI Singapore which could stimulate trading interests,” the team notes.

The team anticipates movement restrictions could be further relaxed as more of the population gets vaccinated, supporting economic recovery. 

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“Coupled with our constructive view on STI (one of the cheapest among ASEAN peers), these factors should help sustain both SADV and DADV,” the team adds.

RHB's target price of $11.60 translates to 13% upside and 3% yield.

SGX closed up 24 cents or 2.32% higher at $10.59 on April 19.