Singapore Exchange upgraded to 'buy' on rising volumes and steady operating yield

Singapore Exchange upgraded to 'buy' on rising volumes and steady operating yield

PC Lee
13/04/18, 05:03 pm

SINGAPORE (Apr 13): Jefferies is reiterating its "buy" on Singapore Exchange given optimistic market sentiment and bouts of volatility have improved securities and derivative volumes.

For the financial year ended March, securities traded value is up 11.5%, derivatives trading volume is up 22% while period-end open interest is up 9.5% y-o-y.

SGX offers a dividend yield of 4% derived from unlevered operating cashflows and FactSet consensus earnings are expected to grow 9.5% and 5.7% for FY18 and FY19 respectively.

SGX announced its plan to list new India equity derivative products in June to provide investors access and tools to hedge exposure in Indian capital markets. The launch is before the August timeline and will enable market participants to seamlessly transition their current India risk management exposures.

See: Singapore Exchange to list new India equity derivative products in June

See: India's NSE seeks SGX to delay stock futures

See: Singapore Exchange seeks to defuse tensions over National Stock Exchange of India in futures dispute

In a Thursday report, analyst Krishna Guha says this is likely to mitigate concerns on earnings impact from current suite of products which are likely to phase out, earliest by August.

The exchange also announced that work is ongoing to evaluate a joint trading and clearing model in Gujarat International Finance Tech (GIFT) city between the National Stock Exchange of India (NSE) and SGX to meet the risk management needs of international participants.

While implementation is not feasible before Aug expiry of the licence agreement with NSE, SGX remains committed to engagements with NSE and other relevant stakeholders in India towards a collaboration in GIFT city.

Currently, SGX has three derivative product suites that offer investors access to Indian markets, namely futures and options linked to SGX Nifty and its various sub classes, futures and options linked to MSCI India, and futures linked to Indian single stocks. The Nifty suite of products will be impacted by the expiry of the licence agreement with NSE.

"We had estimated earnings to be impacted mid to high single digits in the absence of any complementary products," says Guha.

To the extent that the new product suite enables investors to seamlessly transition their current India risk management exposures, Guha expects earnings impact to be mitigated.

That said, he does notice a decline in open interest of SGX Nifty front month futures -- daily open interest has declined from average 380,000 contracts to 314,000 contracts.

While it may be attributed to prevailing uncertainty related to the product suite, it may also be due to outlook of India's equity market, currency, their correlation or risk appetite.

"We will keep an eye if open interest recovers after the new product launch," says Guha.

Shares in SGX closed 10 cents higher at $7.47 on Friday.

DBS kept at 'buy' with still more upside expected ahead: RHB

SINGAPORE (Jan 21): RHB Research is maintaining its “buy” call on DBS Group Holdings with an unchanged target price of $29.80. This comes on the back of expectations of still more upside ahead, led by widening net interest margin (NIM). Analyst Leng Seng Choon notes that the 3-month SIBOR has been on a rising trend. It currently stands at 1.89%, after hitting an average of 1.73% in 4Q18 – some 0.1 percentage point higher than the preceding quarter. While he explains that there is some lag effect from the SIBOR rise to filter through to NIM widening, Leng believes DBS’ 4Q18 NIM....

Temasek ramps up pressure over Standard Chartered turnround: FT

SINGAPORE (Jan 21): Standard Chartered’s largest investor Temasek has grown frustrated with the slow pace of chief executive Bill Winters’ turnround, according to a report by The Financial Times of UK, and is stepping up pressure on the UK-listed bank ahead of his pivotal strategy update in February. The Singapore state investment company, which owns about 16% of StanChart, was reported by FT to be asking for more frequent and detailed briefings from top executives and even floated the prospect of taking a board seat in a meeting last year, two people with knowledge of the discussion to....

Ascendas-Singbridge properties to house public EV charging network with help from SP Group

SINGAPORE (Jan 21): Ascendas-Singbridge Group is appointed as Singapore Power (SP) Group’s first major location partner in its plans to build “Singapore’s largest and fasted public EV charging network” with 1,000 charging points island-wide by 2020. Under the partnership, 24 charging points were installed in six buildings owned by Ascendas-Singbridge – Hyflux Innovation Centre at  80 Bendemeer Road, Corporation Place, Techlink, Techplace I, The Capricorn and The Kendall – with operations commencing in phases since Dec 2018.   Main image: SP Group CEO Wong Kim Yin (l....