SGX

SGX: The positive was that SGX’s 2Q15 result was inline with expectations. The negative was that increased cost guidance will lead to downgrades. Bulls pointing to the positives of derivative volumes and the board lot reduction will ultimately be disappointed in CLSA's eyes…and early signs support that view. House reckons there will be disappointment in the cost guidance for the year, which rose from $330-340m to $360-370m, with higher royalties, the consolidation of EMC and costs associated with market outages to blame. More recent upgrades from the street have FY15 NPAT coming in in the $350-370m range. With 1H15 only hitting $165m, CLSA would have expected downgrades even without the higher cost guidance. CLSA maintains SELL with TP of $7.00.