SGX

SGX: Could see some positive sentiment, after Co. report strong vol growth in Aug, with Turnover increased 31% yoy to $41.4b, while securities daily average value was $1.97b. Exchange traded fund turnover more than doubled from a year earlier, increasing by 156% to $1.18 b and structured warrants vol increased by 189%, more than doubled yoy to 5.2m units.

While this may be a one-off event, we Kim Eng (Buy: TP $7.90) expect introduction of high frequency traders (REACH engine) to add more volatility to mkt over time. With the various new products introduced, believe rev going forward will be increasingly less reliant on securities trading, which makes for more stable earnings.

Add that SGX has come to end of a capex cycle and with a growing cash hoard, believe it will be able to pay out 100% earnings in foreseeable future, even though div policy is only for a min 80% payout. This will provide downside support for the stock. Even for the worst year during the credit crisis of FY09, div was $0.26/ share, which would translate to 3.8% yield at current price.