• Stay NEUTRAL and SGD12.80 TP, 1% upside. Singapore Exchange’s securities turnover and derivatives trading volume for November are tracking our estimates. In line with expectations, growing investor interest in Singapore equities and active trading in index stocks, especially banks and REITs, boosted the securities turnover. Although the derivatives data was soft MoM, we expect markets to remain volatile for a few months and support strong derivative volumes. SGX’s share price has already delivered 29% returns this year, and we see limited additional re-rating catalysts.

• Strong securities trading data. November turnover and securities daily average traded value (SDAV) of SGD30.1bn and SGD1.44m were up 51% each YoY, aided by strong rises in the turnover for the financials (includes REITs), industrials, and telecommunications sectors. The revised market expectations of a slower reduction in US interest rates and strong quarterly results from the banks drove the performance. Singapore was the most actively traded cash market in ASEAN and among Asia-Pacific developed markets, as the STI led ASEAN markets with a 17-year high for three consecutive days. SGX also witnessed the secondary listing of PC Partner Group on the Mainboard, as well as the listings of Goodwill Entertainment and Attika Group on the Catalist in November. SGX noted that retail investors net bought SGD346m of REITs during this period, the highest since mid-2023. FY25 YTD turnover and SDAV were up 40% and 37% YoY. The implied 1HFY25 SDAV is only 2% above our estimate.

• Derivative volume grows YoY but is soft MoM. November derivatives volume of 26.1m contracts and derivatives daily average volume (DDAV) of 1.24m contracts were each up 17% YoY. On a MoM basis, both numbers were down 17% and 13%. The volumes for derivative products were higher for equities (+17% YoY) and FX (+50% YoY). The volumes for commodity derivative products fell 7% YoY, largely due to lower volumes for iron ore, freight, and energy contracts. FY25 YTD derivatives volume and DDAV are up 24% and 21% YoY. The implied 1HFY25 DDAV is in line with our estimates.

• Earnings sensitivity and unchanged thesis. We expect the market to remain volatile in the near term as we await the potential impact of President-Elect Donald Trump’s policy initiatives on economic growth, interest rates, and global geopolitics. We included our FY25F earnings and TP sensitivity to changes in SDAV and DDAV in Figures 7 and 8. SGX’s forward yield of 3% remains well below the market yield of 5.3%. Our investment thesis and valuation basis remain unchanged. Our TP includes a 4% ESG premium to its fair value, given SGX’s 3.3 ESG score vs. the 3.1 country median.

Source: RHB Securities Research - 10 Dec 2024