Trading momentum should sustain through FY2021

RHB Group Research is keeping its “buy” rating for Singapore Exchange (SGX) with an unchanged target price of $11.60, as its Singapore research team is confident that trading momentum will sustain for the rest of FY2021 ending June. 3QFY2021 ended March total securities trading value and securities average daily value (SADV) came in at $94.2 billion and $1.52 billion which were 7.1% and 5.6% lower y-o-y respectively.

However, the team says the y-o-y normalisation is within expectations as the market saw extreme volatility at the start of the pandemic and notes SADV grew 18% q-o-q.

The Straits Times Index (STI) also advanced 10% during this period, outperforming regional peers.

9MFY2021 equity total trading value and SADV grew y-o-y by 7.9% and 8.4% at $256 billion and $1.35 billion respectively, making up 76% of RHB’s full-year forecast of $335 billion total trading value.

The year-to-date derivatives average daily volume (DADV) was 6% lower y-o-y as record volume contracts were traded due to the outbreak of Covid-19 in March 2020. However, 3QFY2021 DADV was 19% higher q-o-q.

“We expect the active derivative trading to sustain global uncertainties and MSCI Singapore rebalancing. Sea Limited is expected to be included in MSCI Singapore which could stimulate trading interests,” the team notes.

The team anticipates movement restrictions could be further relaxed as more of the population gets vaccinated, supporting economic recovery.

“Coupled with our constructive view on STI (one of the cheapest among Asean peers), these factors should help sustain both SADV and DADV,” the team adds.