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RHB stays 'neutral' on SGX as 'the disappointment continues'

Jovi Ho
·3-min read

RHB notes increased trading activity on the Singapore Exchange in November, but securities data still remains below estimates.

RHB Bank Singapore notes increased trading activity on the Singapore Exchange S68 (SGX) in November, but securities data still remains below estimates.

In a Dec 13 note, RHB analyst Shekhar Jaiswal maintains his “neutral” call on SGX, with an unchanged target price of $10.30. This represents an 8% upside.

Jaiswal sees downside risks to his estimates, given the ongoing weakness in securities trading data for the first five months of SGX’s FY2024 ended June 2024.

Although the total securities market turnover value gained 1% m-o-m in November to $19.7 billion and the securities daily average value (SDAV) climbed 6% m-o-m to $952 million, both numbers were down y-o-y.

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Year to date, the securities market turnover value and SDAV for FY2024 are both tracking 14% below the numbers for the same period in FY2023.

The implied FY2024 SDAV, based on data through November, is 15.2% below RHB’s estimate.

Annualising the year-to-date data would imply a target price that is 8% lower, adds Jaiswal. “Still, we maintain our estimates for now as we expect securities trading activity to improve in 2024 amid an expected revival in economic growth.”

S-REITs shine

In November, SGX saw the listing of Winking Studios on the Catalist Board. Singapore was also the second-most actively traded securities market in Asean, with higher trading activity coming from both institutional and retail investors across index constituent stocks, S-REITs and small- to mid-cap counters.

Expectations of a rate cut by the US Federal Reserve drove investors’ reallocation into S-REITs, with the sector witnessing its most active daily turnover since March, notes Jaiswal. All S-REITs and property trusts that traded in November ended the month in positive territory.

Derivatives tracking estimates 

Derivatives trading activity, meanwhile, should remain robust, says Jaiswal, offset by a likely dip in treasury income next year amid an eventual fall in interest rates.

Derivatives traded volume came in at 22.4 million contracts, down 6% y-o-y and up 8% m-o-m in November.

Derivatives daily average volume (DDAV) came in at 1.06 million contracts, down 1% y-o-y and up 14% m-o-m. The overall rise in derivatives volume was driven by record commodity derivatives volume and higher FX futures volume.

Year to date, derivatives traded volumes and DDAV for FY2024 are unchanged from the same period in FY2023. The implied FY2024 DDAV, based on data through November, is in line with RHB’s estimate.

According to Jaiswal, the stock is trading slightly below its historical average P/E, which he thinks is fair. “Despite SGX’s plans to boost dividends by a mid-single-digit percentage in the medium term, its yield is below the market average of 5.7%.”

As at 11.51am, shares in SGX are trading 8 cents higher, or 0.84% up, at $9.65.

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