Singapore Exchange (SGX SP) - DBS Research 2018-02-19: Updates On SGX Nifty's Successor Products

Singapore Exchange (SGX SP) - DBS Vickers 2018-02-19: Updates On SGX Nifty's Successor Products SINGAPORE EXCHANGE LIMITED S68.SI

Singapore Exchange (SGX SP) - Updates On SGX Nifty's Successor Products

  • Successor products to SGX Nifty family of products to be listed before August 2018, offering same ability to invest and maintain risk exposure to Indian capital markets – a positive development.
  • SGX Nifty family of products continue to be listed, traded, and cleared uninterrupted until August 2018 at a minimum.
  • SGX working with National Stock Exchange of India to develop trading link.
  • Maintain BUY, Target Price of S$8.90; share price could still be under pressure pending further details of resolution.



What’s New 


Successor products to SGX Nifty family of products to be listed before August 2018 – a positive development. 

  • SGX has announced this morning that the successor products to its SGX Nifty family of products will be listed before August 2018. 
  • While details of the successor products have yet to be announced, according to SGX, market participants will have “the same ability to invest and maintain their risk exposure to the Indian capital markets”. According to SGX, details on the products will be communicated by March 2018 (Our previous report can be found here: Singapore Exchange: Addressing concerns about Nifty).

Assurance on current status of SGX Nifty family of products.

  • Meanwhile, SGX continues to assure market participants that the SGX Nifty family of products can continue to be listed, traded, and cleared uninterrupted until August 2018 at a minimum, as the Indian exchanges have yet to serve the notice of termination for the licensing of data for offshore derivatives linked to their domestic indices, following which there will be a six-month notice period.

Potential trading link with National Stock Exchange of India (NSE). 

  • SGX has indicated that it will continue to work with NSE to develop a link in Gujarat International Finance Tech (GIFT) city – India’s first operational smart city and international financial services, where market participants can trade on NSE’s International Exchange (NSE IFSC Limited), managing their clearing exposures through SGX.
  • According to previous Bloomberg reports on the potential trading link, NSE CEO Vikram Limaye was quoted as saying that “buy and sell orders from SGX’s customers would be routed to NSE’s IFSC Ltd exchange, would be tax-free and offer contracts in dollars”.


Our View 


Positive development for successor products. 

  • We view the announcement of the successor products to SGX Nifty family of products as a positive development to the chain of events which unfolded last week. Based on our understanding, the successor products will not require the licensing of market data from India’s three main stock exchanges and will be constructed and priced on mechanisms similar to the India Single Stock Futures. 
  • The successor products, though not as well-established as the SGX Nifty family of products, will continue to allow access into Indian markets and feed demand for Indian offshore products.

Trading link will be a boost in the long term. 

  • The development of a trading link with NSE will be a boost to SGX in the long term should it materialise. However, we believe that it might take both SGX and NSE more time to iron out the details with respect to the trading link, and look forward to the updates on the progress by March 2018.


Valuation and Recommendation 


Keeping our BUY rating, Target Price of S$8.90; share price may be under pressure in the near term, pending further details of resolution. 

  • While the update on the launch of successor products as well as a potential trading link provides a positive development to the turn of events, SGX’s share price may still be under pressure in the near term as the market seeks more clarity on details of resolution even as SGX continues to assure market participants on the existing products as well as certainty and continuity of successor products. 
  • Meanwhile, in our view, SGX’s stock price should still be supported by its stable and sustainable dividend yield of 4% and its continued efforts to drive market liquidity and new product initiatives, which should bear fruit in the coming years, including the recently announced trading link with Bursa Malaysia. 
  • Our Target Price is based on the dividend discount model, implying 21x FY19F PE.




Singapore Research DBS Vickers | Sue Lin LIM DBS Vickers | http://www.dbsvickers.com/ 2018-02-19
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 8.900 Same 8.900



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