SGX

SGX: Macquarie launches new warrant on SGX after the shares rallied 4.5% last wk (versus the STI’s +0.3%), in particular, jumping 3.4% last Tuesday to make its biggest one-day gain in 3 years. Currently, exchanges are attractive to investors as a dividend play, or as a proxy to the domestic market. However, Macquarie believes topline growth for ASEAN exchanges will get more exciting again, after years of muted performance. Potential growth drivers are higher volatility in the near term from macroeconomic conditions, including from potential changes in interest rates due to US Fed policy updates, and (ii) the futurization of over-the-counter (OTC) derivatives. Specifically, MER believes the futurization of foreign exchange futures will be an exciting growth opportunity for the exchanges. SGX is well positioned to be a centre for Indonesian-Ringgit denominated futures and an offshore-Renminbi centre. Renminbi-denominated currency futures could be an attractive product offering for Bursa. SGX (Outperform, TP to $ 8.00, from $7.80) has positioned itself well in equity index derivatives, thus leveraging Singapore’s role as an offshore financial centre. SGX has been a dividend play, and a proxy to the Singapore market. A turnaround in revenue trends would be a major positive catalyst for the share price. Growth has been disappointing with low single-digit compound annual growth rates in recent years. However, with higher futures trading volumes and more retail participation from a low base, MER believes SGX is well place with the right products and platform to ride on the next wave of securities and derivatives growth.