Published October 17, 2008
Analysts maintain 'sell' call on SGX
They cite bearish market, the global crisis; set average target price at $5.56
By CHEW XIANG

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ANALYSTS largely maintained their 'sell' calls on the Singapore Exchange after it reported a 35 per cent plunge in its first-quarter earnings on Wednesday.
And OCBC Investment Research, which had a 'buy' call, yesterday downgraded the stock to 'hold'.
According to Bloomberg data, 10 houses that had issued reports following the latest results reported an average target price of $5.56. SGX closed yesterday 35 cents down at $5.54.
OCBC's Carmen Lee explained that the house was cutting its valuation parameter in line with the sharp drop in market valuations, and also lowered its fair value estimate from $8.50 to $5.80.
Kim Eng analyst Pauline Lee maintained a 'sell' call, saying that 'SGX's stable dividend payout and its monopolistic status will be overshadowed by the global financial crisis'.
'Furthermore, SGX's premium valuations over its close peer, the Hong Kong exchange, suggests further downside in the share price,' she added.
Most bullish was CIMB's Kenneth Ng, who kept an 'outperform' call on the stock with a target price of $7.78. 'Bearish stock markets aside, the structural derivatives potential should not be overlooked,' he said.
'SGX has been benefiting handsomely from the ban on P-notes (offshore derivative instruments) in India, which has channelled international funds to Singapore for India exposure via the Nifty50 contract,' he added.
SGX had reported that net derivatives clearing revenue rose 23.6 per cent to $46.1 million, due to a 40 per cent jump in futures trading volume to 17.4 million contracts compared with 12.5 million contracts in the same period a year ago.
DMG's Leng Seng Choon said that he expected derivatives clearing fees for FY09 to match that of securities clearing fees. 'This is the consequence of the very robust futures market versus the lacklustre securities market,' he said.
OCBC's Ms Lee said that with recent volatility in the market, 'trading volume on the local bourse has picked up in the past two weeks', adding that if this month's early positive trend continues, the second quarter could be slightly better, although the second half 'could be hurt by heightened recession worries'.
Others are less sanguine. DBS Vickers said: 'We remain bearish on equities for the rest of this year and do not expect any significant turnaround in 2009.'
It is assuming volume of one billion units on the stock exchange for FY2009 and 1.2 billion for FY2010, with turnover value hovering around the billion dollar mark in each year.
In its bear case scenario, average volume could fall below 900 million units, DBS Vickers said, with turnover value below $855 million. Fair value could, in this scenario, decline to just $3.75 a share.