SGX

SGX: During the DB conference, group's derivatives business was in focus- in which SGX believes its recent growth trends in derivatives revenues and turnover can be continued in the near term. Its fast-growing derivatives business now account for more than 40% of gross trading revenues, up from 33% in FY11. Its key competitive advantage against peers are its primary focus on regional equity indices as opposed to single-stock options – to which SGX plan to launch in the coming months. It currently has an agreement with MSCI for the ownership of derivatives on 14 further MSCI indices, with the launch of MSCI Philippines by year-end. On its securities segment, SGX plans to boost the average daily turnover by targeting retail participation, which accounts for 40% currently. Group plans to reduce minimum board lot sizes from the current 1,000 to encourage both retail and high-frequency trading (HFT), which could happen in the next 12-15 months. This could promote a significant improvement in liquidity, especially as the cost of buying blue chips is simply too high for many local investors. Lastly, group stated that IPOs are expected to pick up over the coming months; the pipeline has been healthy for a while but companies are waiting for market conditions to improve. DB has a HOLD rating, TP of $7.90; SGX trades at 26.7x trailing P/E, has long-term average P/E of 24.1x. (+1 s.d. of 29.3x)