SGX

SGX: We highlight contrasting views on the counter, with Deutsche resuming coverage with a Buy rating (TP $8.70), while CLSA downgraded to Underperform (TP: $7.25). On the positive end, Deutsche highlighted the 16.5% discount on valuation and above-average ROE to AsiaPac exchanges. Earnings is expected to be supported by the surge in China-centric and commodity derivative products, particularly the China A50 futures, which is the clear, indirect beneficiary of the Shanghai-Hong Kong Stock Connect. In the core equities segment, the upcoming board lot size reduction in Jan 2015 and successful listings of Chinese-incorporated companies should catalyse average daily turnover growth. However, CLSA opines that Singapore has been increasingly plagued with low velocity stocks since the global financial crisis in 2008, despite the overall increase in market cap. This translates into a shift in mix towards lower beta stocks which means a rise back in velocity to pre-GFC levels for a spike in earnings on a bull market environment may be quite a uphill struggle, reflecting a structural decline. Bloomberg consensus has 5 Buys, 13 Holds and 2 Sells ratings on the counter, with 12-month TP of $7.51.