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RHB upgrades estimates on SGX following strong securities data but remains 'neutral'

Cherlyn Yeoh
Cherlyn Yeoh • 3 min read
RHB upgrades estimates on SGX following strong securities data but remains 'neutral'
RHB's Shekhar Jaiswal has increased his target price on the exchange after its August securities turnover data. Photo: Albert Chua/The Edge Singapore
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RHB Bank Singapore analyst Shekhar Jaiswal has increased his target price on Singapore Exchange S68

(SGX) to $11.70 from $10.80 after the group’s August securities turnover data came in “well ahead” of his estimates.

On Sept 9, SGX reported that securities daily average traded value (SDAV) grew 28% y-o-y and 19% m-o-m to $1.37 billion being the highest since March 2022. The implied 1HFY2-25 SDAV was much higher than Jaiswal’s estimate and he expects volatility to persist within the securities market for a few months given the US elections and interest rate outlook.

On this, the analyst has raised his profit estimates for FY2025 – FY2026 by 5% and 3.3% in view of the higher SDAV estimates.

“We expect the volatility in the securities market to persist for a few months as investors await clarity on the interest rate outlook and the outcome of the US elections,” he writes in his Sept 10 report.

“SGX noted that the growth in trading activity originated from both institutional and retail clients and across stock segments,” he adds. In August, the exchange also highlighted that retail investors net purchased $685 million worth of securities, making this the highest in 10 months. Year-to-date (ytd) returns from the benchmark Straits Times Index (STI) stood at 6.7%. However, the index fell by 0.4% m-o-m to 3,442.93 points as at the end of August.

Jaiswal also notes that SGX’s derivatives business remains strong, with total derivatives traded volume of 24.6 million contracts in August meeting his 1HFY2025 estimates. During the month, SGX’s foreign exchange (FX) and commodities derivative volumes exceeded his estimates. This was offset by the lower-than-estimated equity derivative volume.

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In commodities, energy trading volumes saw a solid rise, and the rise in interest rates futures can be attributed to the recently launched three-month Tokyo Overnight Average Rate (TONA).

Looking ahead, Jaiswal believes that SGX will see an increase in equity listing in FY2025 – FY2026 and the currently elevated SDAV will moderate in 2HFY2025 when investors gain clarity on the interest rate and global economic growth outlook. In the longer term, he expects the derivatives business’ revenue growth to “significantly exceed” that of the securities business revenue.

In addition, the analyst sees downside risks to the treasury income estimates given potentially lower interest rates.

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Despite his estimate upgrades, Jaiswal remains “neutral” on SGX and notes that the group’s forward yield of 3.3% remains “unexciting”.  

The analyst continues to value SGX based on a forward P/E of 21 times, which is in line with the group’s historical average.

As at 11.09am, shares in SGX are trading at 26 cents higher or 2.368% up at $11.24.

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