• Keep NEUTRAL, with new SGD11.70 TP from SGD10.80, 8% upside. With more than 20% YoY growth, the August securities turnover data came in well ahead of our estimates. Total derivatives trading volume was largely in line with our estimates. We raise FY25F-26F (Jun) profit by 5% and 3.3% to account for higher securities daily average traded value (SDAV) estimates. We see downside risks to our treasury income estimates amidst potentially lower interest rates and expect the elevated SDAV to moderate in 2HFY25.

• SDAV grew 28% YoY and 19% MoM. August saw the second consecutive month of strong securities trading data, with SDAV of SGD1,370m being the highest since May 2022. The implied 1HFY25 SDAV was significantly above our estimate. 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. Singapore Exchange noted that the growth in trading activity originated from both institutional and retail clients and across stock segments. Retail investors net purchased SGD685m of securities, which was the highest in 10 months. YTD returns from the Straits Times Index (STI) stood at 6.7%, even as the benchmark declined 0.4% MoM to 3,442.93 pts.

• The derivatives business remains strong. Total derivatives traded volume increased 4% YoY in August to 24.6m contracts, with DDAV of 1.17m contracts increasing by 9% YoY and 15% MoM. While the total trading volume is closely tracking our implied 1HFY25 estimate, we note that the FX and commodity derivative volumes are exceeding our estimate, and the equity derivative volume is tracking below our estimate. We have fine-tuned both numbers accordingly. In August, the Nikkei 225 and the GIFT Nifty derivatives traded volume saw an increase. In commodities, energy trading volumes saw a strong rise, and the rise in interest rate futures was driven by the recently launched three-month Tokyo Overnight Average Rate (TONA) futures. SGX noted that elevated volatility following the market dislocation in the earlier part of the month drove trading activity in equity derivatives and record FX futures volume.

• What’s next? For FY25F-26F, we believe that SGX should see an increase in equity listings. However, the currently elevated SDAV should moderate in 2HFY25F once investors have clarity on the interest rate and global economic growth outlook. Over the longer term, we expect the derivatives business’ revenue growth to significantly exceed the growth in securities business revenue. Despite management guidance of increasing dividends, SGX’s forward yield of 3.3% remains unexciting. We continue to value SGX based on c.21x forward P/E, which is in line with its historical average. Our TP includes a 6% ESG premium to its fair value of SGD11.00.

Source: RHB Research - 10 Sep 2024