CGS-CIMB Research analyst Andrea Choong has maintained her ‘add’ rating for Singapore Exchange (SGX) with an unchanged target price of $11.61, as trading volumes are expected to remain steady for FY2021 ending June 2021.

Choong notes that securities daily average value (SDAV) for February held steady at $1.4 billion, compared to January’s $1.5 billion.

“Despite the slight m-o-m dip, overall volumes remain supported by portfolio rebalancing activity amid optimism over improving global growth, concerns over rising inflation, and increasing US treasury yields,” she writes in a research note dated March 11.

However, total derivatives volumes declined 11% m-o-m to 17.7 million contracts, due to the Lunar New Year holidays resulting in reduced volumes for the FTSE Taiwan, Nikkei 225, and China A50 indices.

Nevertheless, she believes equity turnover will sustain over FY2021 given the low rate environment and buoyant financial markets.


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Choong notes that SGX’s FTSE Taiwan Index futures are gaining traction, with volumes rising from around 82,000 in July 2020 to two million in January. SGX maintained a market share of more than 90% of total offshore Taiwan index futures volumes and open interest of 113,000 contracts in February. 

“Although weaker derivatives volumes could present some revenue headwinds, we expect this to be offset by higher average clearing fees per contract ($1.16 in 2QFY2021 vs. $1.33 in FY2019) given the expiry of the fee holiday on introductory FTSE product replacements,” she adds.

Sustained trading momentum of FTSE Taiwan Index futures post-fee holiday is expected to close the earnings gap left by the departure of key MSCI contracts. 

Choong also positively views SGX’s focus on seeking M&A deals to bolster its multi-asset platform, most recently incorporating joint ventures to launch a bond trading platform and digital asset infrastructure.

Her target price of $11.61 is pegged to SGX’s 25 times FY2022 P/E.

As at 3.30pm, shares in SGX are down 6 cents or 0.59% lower at $10.09.