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SGX's recent recovery in turnover not priced in by the street yet, says Citi Research

Felicia Tan
Felicia Tan • 2 min read
SGX's recent recovery in turnover not priced in by the street yet, says Citi Research
Citi Research analyst Tan Yong Hong is keeping his “buy” call on Singapore Exchange (SGX) with an unchanged target price of $10.70 after the exchange reported its market statistics for the month of May. Photo: Albert Chua/The Edge Singapore
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Citi Research analyst Tan Yong Hong is keeping his “buy” call on Singapore Exchange S68 -

(SGX) with an unchanged target price of $10.70 after the exchange reported its market statistics for the month of May.

During the month, total market turnover value rose by 16% y-o-y and 5% m-o-m to $26.7 billion over 21 trading days. Securities daily average value (SDAV) grew by 22% y-o-y and 5% m-o-m to $1.3 billion, making this the highest in a year.

According to SGX, SDAV surged amid robust activity from the corporate earnings season and the quarterly rebalancing by the MSCI. The benchmark Straits Times Index (STI) was up by 1.3% to 3,336.59 points.

Derivatives traded volume rose by 17% y-o-y but fell by 1% m-o-m to 23.9 million contracts while derivatives daily average volume (DDAV) was up by 16% y-o-y but fell by 4% m-o-m to 1.1 million contracts.

“Our current forecasts assume 2HFY2024 SDAV [to be at] $1.15 billion and DDAV at 1.16 million. Our FY2024 earnings are 3% ahead of consensus,” Tan writes in his June 7 (US Eastern time) report.

In comparison, SGX’s SDAV for the first five months this year came at a cumulative $1.169 billion while DDAV stood at 1.17 million contracts.

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While the consensus currently expects SGX’s revenue – excluding cash equities – to be 5% higher on a h-o-h basis, Tan expects analysts to increase their earnings estimates towards SGX’s FY2024 earnings due August.

“[The] recent recovery in turnover, we believe are not yet factored in by the street, and could lead to upside earnings surprise,” says Tan.

“SGX’s strategic priorities are growth and diversification. In our view, potential measures that could boost trading liquidity on SGX and provide further positive catalysts, include creating tech ecosystem by removing profitability criteria for initial public offerings (IPOs), incentivising assets under management (AUM) to invest more in Singapore (versus current 88% invested overseas) and sovereign funds creating additional liquidity pool,” he adds.

Shares in SGX closed 7 cents lower or 0.72% down at $9.60 on June 10.

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