RHB Bank Singapore analyst Shekhar Jaiswal is remaining &ldquo neutral&rdquo on Singapore Exchange S68 - (SGX) with a lowered target price of $9.60 from $10.30 previously, as its operating data for the 1HFY2024 ended Dec 31, 2023, came in &ldquo well below&rdquo his estimates. Securities trading data stood 8% lower than Jaiswal&rsquo s estimates while derivatives tracking data stood within his expectations.

 

On Jan 12, SGX reported its market statistics for December 2023. The exchange&rsquo s securities daily average value (SDAV) stood at $951 million, up 2% y-o-y and steady m-o-m while its derivatives daily average volume (DDAV) rose by 13% y-o-y at over 1 million contracts. SGX&rsquo s derivatives traded volume rose by 6% y-o-y to 21.1 million contracts in December.

 

&ldquo While we mark to market (mtm) the weak 1HFY2024 SDAV data in our estimates, we maintain some optimism on 2HFY2024 SDAV amid improving economic growth outlook and some clarity on moderation in interest rate outlook spurring interest in Singapore REITs (S-REITs),&rdquo says Jaiswal in his Jan 16 report.

 

The mtm of SGX&rsquo s 1HFY2024 securities data subsequently resulted in Jaiswal lowering his earnings estimates for the FY2024 to FY2026 by 4% each.

 

&ldquo We also now ascribe a lower 6% environmental, social and governance (ESG) premium to SGX&rsquo s fair value as its ESG score of 3.4 is now only 3 points above the revised country median ESG score of 3.1,&rdquo he adds.

 

However, Jaiswal remains positive on SGX with the benchmark Straits Times Index (STI) outperforming in December.

&ldquo Singapore&rsquo s equities market outperformed [its] Asean peers in December, with the STI advancing 5.4% m-o-m. Retail investors drove securities trading activity for a third consecutive month, with growth across segments including index stocks, REITs, as well as small- and mid-cap stocks,&rdquo the analyst writes.   &ldquo SGX saw the listing of 17Live, the first de-spac (or special purpose acquisition company) in Singapore and major Asian markets.&rdquo

 

&ldquo We believe Singapore&rsquo s positive economic growth prognosis and the expectations around moderation in interest rates could bring investors back to Asia' s highest-yielding market,&rdquo he adds.

 

At its present levels, SGX is trading in line with its historical average P/E, which Jaiswal deems to be &ldquo fair&rdquo .

TOTAL securities market turnover on the Singapore Exchange (SGX) dropped 4.8 per cent in December 2023 to S$19 billion, with a steady securities daily average value (SDAV) at S$951 million.

 

On the year, SDAV rose 2 per cent, as retail investors drove trading activities on SGX securities for a third consecutive month, with growth across index stocks, real estate investment trusts (Reits), as well as small- and mid-cap stocks, according to SGX&rsquo s monthly market statistics report released on Friday (Jan 12).

 

SGX noted that the SDAV of Reits rose 2 per cent on the month, led by a stabilising interest rate environment and net inflows from institutional investors for the first time in a year.

 

The bourse regulator added that Singapore&rsquo s equities market outperformed its South-east Asian peers in December, with the benchmark Straits Times Index advancing 5.4 per cent on a monthly basis.

 

The market turnover value of exchange-traded funds grew 18 per cent on a monthly basis to S$277 million.

 

On the derivatives, the overall traded volume rose 6 per cent on the year in December to 21.1 million. The daily average volume of derivatives was up 13 per cent, at more than a million contracts. 

 

SGX said: &ldquo Heightened trading activity in commodities and foreign exchange (FX) derivatives lifted volume gains for the month, while steady global institutional interest in key equity index futures contracts brought open interest to a strong close for the final quarter of the year.&rdquo

 

The exchange added that increased adoption among financial participants fuelled the growth of the iron ore derivatives market to a record high, at 4.4 billion metric tonnes in 2023, up 43 per cent from the year-ago period.

 

The volume of commodity derivatives traded rose 45 per cent on the year to 4.2 million contracts, with the volume of benchmark iron ore derivatives up 45 per cent. The volume of forward-freight agreements also surged 74 per cent in December on the year.

 

&ldquo For the October-to-December quarter, commodity derivatives volume climbed 50 per cent year on year to 14.1 million contracts, with gains across iron ore, freight, petrochemicals and rubber derivatives.&rdquo

 

The volume of total FX futures traded for the month increased 44 per cent on the year to 4 million contracts over the period, raising the three-month period tally by 13 per cent to 11.4 million contracts.

 

SINGAPORE Exchange (SGX) chief financial officer (CFO) Ng Yao Loong will transition to the position of head of equities by mid-2024.

 

He will take on the role to join Janice Kan as co-head, &ldquo to provide dedicated leadership in the development of our securities market&rdquo , said SGX.

 

In the meantime, Ng will continue to serve as CFO. The search for a new CFO is underway, said the bourse operator on Wednesday (Dec 13).

 

SGX revamped its management structure in September. Michael Syn, then the head of equities, was appointed the bourse&rsquo s new president and head of its global markets division.

THE earnings of companies listed on the Singapore Exchange (SGX) fell for the third quarter of 2023 ended September amid high interest rates, persistent inflation and an economic slowdown in China.

 

A compilation of results by The Business Times as at Nov 30 showed that the aggregate profits of the 111 companies that had released their quarterly financial results or updates for the quarter stood at S$8.7 billion, down 6.8 per cent from the corresponding period last year.

 

While analysts expected earnings for Q4 to remain weak for most sectors, they were optimistic that some sectors such as technology and real estate investment trusts (Reits) would see some recovery in 2024.

 

Of the 111 companies that released their financial results, 71 were profitable for the quarter to September, while 40 were in the red.

 

Of the 71 profitable companies, 33 posted a smaller bottom line. Another 31 managed to improve their earnings, and seven swung back into profitability from a loss in the year-ago period.

 

Nineteen of the companies in the red managed to trim their losses, but 11 had their losses balloon, and 10 became loss-making during the quarter.

 

Quarterly scorecard

The banking trio &ndash DBS : D05 +1.35%, UOB : U11 +1.43% and OCBC : O39 +1.12% &ndash led the pack in the earnings tally, with national carrier Singapore Airlines (SIA) : C6L +0.63% just behind.

 

Local Reits Mapletree Pan Asia Commercial Trust : N2IU +0.71%, Mapletree Logistics Trust : M44U +1.24% and Mapletree Industrial Trust : ME8U +0.43% also ranked among the top companies in terms of net profit recorded for the quarter ended September.

 

At the bottom of the pack was dual-listed Top Glove : BVA +2.13%. The glove manufacturer posted a net loss of S$134.7 million for its Q4, versus a net loss of S$18.3 million the previous year, due to lower revenue and a RM388.5 million (S$111.5 million) impairment over the quarter.

 

Headwinds expected

Peggy Mak, research manager at Phillip Securities Research, said that apart from banks and airlines, most companies reported weaker year-on-year net profit.

 

This was particularly so for companies with exposure to China, such as Wilmar International : F34 +2.25%, added Mak. The commodity group&rsquo s net profit for Q3 fell 59 per cent year on year.

 

Most companies were also showing &ldquo some slippage&rdquo in their margins as high interest rates and inflation persisted, said Thilan Wickramasinghe, head of research for Singapore at Maybank Securities.

 

That said, overall margins were still significantly higher than what they were the previous year, he noted.

 

Analysts agreed that the banking sector had remained resilient amid an elevated interest rate environment.

 

Mak noted that net profit of the local banks had increased year on year due to a higher net interest margin (NIM) and fee income from credit cards and wealth management.

 

On the other hand, their quarter-on-quarter performance was mixed, as loan growth fell and higher specific provisions were made in the quarter to account for collateral revaluation, added Mak.

 

Meanwhile, despite SIA&rsquo s strong earnings showing as a result of high passenger loads in Q3, Mak said the national carrier could see lower yield in future.

 

She noted that the airline&rsquo s yield had begun to fall as lower-yielding budget flights take on a bigger share of the increase in passenger load.

 

&ldquo We expect airfare to subside from the current high level, as competition seeps in from other carriers adding capacity aggressively,&rdquo said Mak.

 

Reits rebound on the horizon

Analysts were of the view that Reits&rsquo earnings in the latest quarter had been affected by higher interest costs.

 

DBS analyst Foo Fang Boon said that Reits had their fair share of downwards earning revision in Q3 due to higher interest costs.

 

Similarly, Mak said, the Q3 distribution for Reits was &ldquo broadly lower&rdquo and also affected by the lower income from foreign assets due to the strong Singapore dollar.

 

Within the sector, hospitality Reits generally reported a higher net property income while retail Reits rebounded in gross revenue, said Mak.

 

Nevertheless, Foo said there was &ldquo cautious optimism&rdquo that the Reit sector will improve in 2024 due to developments such as the US Federal Reserve&rsquo s pivot towards a rate pause.

 

The strong line-up of meetings, incentives, conferences, and exhibitions events in the first quarter of 2024 and the return of international travellers should also pave the way for hospitality Reits to deliver positive year-on-year growth, he added.

 

He expressed similar optimism for the tech sector despite the slowdown in the industry. He noted that the purchasing managers&rsquo index (PMI) for electronics in November this year had expanded.

 

The latest PMI for electronics stood at 49.9, a 0.1-point improvement from the previous month. The figure is shy of the 50-point threshold, which indicates a growth in the industry.

 

Mak said that the performance of the tech sector mirrored that of the US semiconductor players. Orders in Q3 were subdued as customers&rsquo inventory destocking persisted.

 

Nevertheless, Mak said, the tech sector appeared to be making a broad-based recovery, and inventory restocking might happen in Q2 of 2024.

 

&ldquo This should benefit the local companies such as AEM : AWX +1.23%, Frencken : E28 +0.81% and Grand Venture : JLB +3.92%, which support the equipment makers,&rdquo said Mak.

 

17LIVE, the first entity to go through a de-spac on the Singapore Exchange S68 1.16% , ended its trading debut on Dec 8 down 73 cents, or nearly a fifth.

 

The counter closed at $3.15, down 18.81% from when it was last traded as Vertex Technology Acquisition Corp (VTAC), which acquired 17LIVE.

 

Nearly two-thirds of previous VTAC' s independent shareholders chose to redeem their shares, even though they gave the go-ahead for the acquisition.

 

When all three spacs were launched for their IPO two years ago, they were all priced at $5 each.

 

17LIVE offers minor celebrities and other creators the platform to do live-streaming - a kind of company that is unique to the SGX.

 

The other two spacs, Pergasus Asia and Novo Tellus Alpha Acquisition closed Dec 8 at $4.80, down 0.21% and $4.88, down 0.2% respectively.

 

Both of these two spacs have yet to announce their business combination targets.