Atiqah Mokhtar Published on Wed, Jun 23, 2021

By The Edge Singapore

RHB Group Research has raised the target price accompanying its ‘buy’ rating for Singapore Exchange (SGX) from $11.60 to $12.30 following ‘robust’ trading momentum in May.

RHB’s Singapore research team notes that securities and derivatives trading both picked up last month. Total securities trading value rose 12% y-o-y to $30 billion, while securities average daily value (SADV) grew 6% y-o-y. For derivatives, total contracts traded grew 6% y-o-y to $18 million, though derivatives average daily value (DADV) remained flat.

The team highlight that SGC’s trading levels have largely tracked their FY2021 ending June forecasts.  “Y-t-d FY2021 total securities trading value and SADV are 7% y-o-y higher, largely driven by the cyclical rotation by portfolio managers, in our view,” the team writes in a June 23 research note. 

They view that Singapore’s gradual economic reopening should further support SGX’s trading scene, on the back of a return of growth for cyclical stocks.

In addition, RHB believes a “homecoming” may be on the horizon, with homegrown tech companies such as Sea, Razer and Grab reportedly contemplating secondary listings on the SGX. “These listings would attract investors and further boost trading activities on the SGX, although the final outcome and incremental trading volumes are still uncertain now,” the team clarifies.

The team is also bullish on SGX’s environmental, social and corporate governance (ESG) push, pointing to its SGX FIRST (Future In Reshaping Sustainability Together) initiatives such as the launch of a suite of ESG derivatives and its work with DBS, Standard Chartered and Temasek on a carbon exchange.

To that end, the team has raised their FY2022-2023 earnings forecast by 6% and 3%, based on higher SADV and DADV assumptions, which underpins their higher target price.