Logo of Phnom Penh Post newspaper Phnom Penh Post - Singapore Exchange shares down 7.4% on Nifty futures exit



Singapore Exchange shares down 7.4% on Nifty futures exit

DBS analyst Lim Sue Lin wrote that stock price should still be supported by its stable and sustainable dividend yield of 4 per cent and its continued efforts to drive market liquidity and new product. ST File
DBS analyst Lim Sue Lin wrote that stock price should still be supported by its stable and sustainable dividend yield of 4 per cent and its continued efforts to drive market liquidity and new product. ST File

Singapore Exchange shares down 7.4% on Nifty futures exit

by Rachel Mui

SINGAPORE (The Straits Times/ANN) - The Singapore Exchange (SGX) stock took a hammering yesterday amid doubts about the future of the market operator's Indian equity index-linked derivatives. Analysts, however, kept their ratings on SGX unchanged, preferring to wait and watch how events unfold.

The SGX stock lost 58 cents to close at S$7.31 (US$5.50) on Monday (Feb 12) - down 7.4 per cent. Some 19.5 million shares changed hands, making it one of the most active counters on the Singapore bourse.

This came on the back of India's announcement that its national stock exchanges would stop providing data feeds to foreign rivals, and eventually halt the trading of offshore derivatives tied to India's benchmark indices such as the Nifty 50, as part of a concerted move to prevent trading volumes from moving overseas.

SGX, which offers the popular SGX Nifty 50 index futures, was busy soothing market participants over the weekend. In a statement on Sunday (Feb 11), the SGX said the market for its entire India suite of products would operate as per normal yesterday.

At the very minimum, it would be business as usual till August, the SGX said. Under its licence agreement with India's National Stock Exchange, there is a six-month notice period for termination.

Analysts at RHB Research, DBS Bank and OCBC Bank kept their ratings unchanged on SGX's stock, despite acknowledging that the Indian development was a negative.

Content image - Phnom Penh Post

OCBC maintained its "hold" rating, with a 12-month target price of S$8.48 against its fair-value estimate of S$8.16.

OCBC analyst Carmen Lee said yesterday that the termination of Nifty licensing could result in a "knee-jerk reaction on SGX's shares", along with some downgrades that could dampen SGX's share price in the near term.

RHB Research kept its "buy" rating with a target price of S$9, noting that SGX Nifty index futures accounted for about 12 per cent of the exchange's total derivatives volumes during the latest quarter. RHB estimated that a 10 per cent decline in the derivatives average daily volume would lower the stock's fair value to S$8.36, while a 20 per cent decline would drag fair value down to S$7.71.

"The impact on FY18 financials is seen as limited, but would be felt more so from FY19 onwards," RHB said. "SGX has indicated that it would work on new product developments to help offset this adverse impact. We are not adjusting our earnings, as we await more information from the company on new products."

DBS analyst Lim Sue Lin, who has a S$8.90 target price and a "buy" rating on SGX, said the share price could be under pressure in the near term, pending the resolution of the current situation.

But "SGX's stock price should still be supported by its stable and sustainable dividend yield of 4 per cent and its continued efforts to drive market liquidity and new product initiatives, which should bear fruit in the coming years, including the recently announced trading link with Bursa Malaysia", Ms Lim wrote.

Separately, FIA, a trade association for global listed and cleared derivatives markets, said India's move "appears likely to disrupt trading on numerous exchanges around the world and alarm international investors".

It added: "We believe that accessible markets are essential for the optimal growth and development of liquidity, and allow customers to hedge their risks and manage their exposures in the most efficient way possible.

"We look forward to discussing this announcement with the Indian exchanges and working with our members to more fully understand the consequences for derivatives markets and their customers."

MOST VIEWED

  • Phnom Penh unveils rules for post-lockdown transition

    The Phnom Penh Municipal Administration issued a set of detailed guidelines for the seven days to May 12 after the capital emerges from lockdown at the onset of May 6. In the 14-page document signed by municipal governor Khuong Sreng released on the evening of May 5, the

  • SBI LY HOUR Bank Launches Cross Border Money Transfer Service between Cambodia and Vietnam on RippleNet, utilizing DLT

    SBI LY HOUR Bank Plc and Hanoi-based Tien Phong Commercial Joint Stock Bank (TPBank) on Friday launched the first Cambodia-Vietnam money transfer service in real currency via RippleNet, provided by SBI Ripple Asia Co Ltd to provide safe, fast and convenient services. SBI LY HOUR

  • Cambodia ready to exit LDC status

    Cambodia is well-prepared to minimise economic risks when it graduates from its Least Developed Countries status, according to a senior official at the Ministry of Commerce on May 7. Four LDCs – Cambodia, Laos, Bangladesh and Nepal – met at a virtual workshop last week to explore potential

  • Nine US franchises eye Cambodia debut

    Nine famous US franchising companies are looking for business opportunities and expansion into Cambodia to build a footstep for a strong foundation in Southeast Asia. The US embassy in Phnom Penh, in partnership with the US Foreign Commercial Service and with support from the American

  • Nearly 2,000 detained for Phnom Penh curfew breach

    Nearly 2,000 people were detained in the capital for violating the curfew imposed by the government and Phnom Penh Municipal Administration. Municipal police spokesman San Sokseyha told The Post on May 16 that people were detained in two phases. In phase one, the government locked down Phnom

  • Jab drive announced for two more Phnom Penh districts

    The Phnom Penh Municipal Administration on May 15 announced a first-dose novel-coronavirus vaccination campaign for Boeung Keng Kang and Sen Sok districts from May 18-31, and a follow-up second-shot drive from June 1-15. Twenty vaccination sites have been set up in a combined 13 communes across both