SGX core net profit predicted to tumble 17.5% to S$84.8m

Blame it on weaker securities, derivatives.

According to CIMB, it expects 1QFY14 core net profit to fall 17.5% qoq to S$84.8m, on weak contributions from both securities and derivatives. 

Here's more:

SGX will be reporting 1QFY14 results on 17 Oct after market close. We expect a weak start to FY14 as securities market turnover value fell 14.9% qoq to S$85bn in Jul-Sep.

As a result, the average daily value traded (ADVT) of securities fell to S$1.33bn from S$1.59bn (4QFY13). Derivatives, a strong performer in previous quarters, also posted a drastic 16.6% qoq decline in traded volumes to 26.3m contracts as interest in the MSCI Singapore and Nikkei 225 Index Futures dried up.

Our estimate is 8% below consensus’ S$92.2m. The bulk of the 1QFY14 weakness can be attributed to: 1) capital flight from Asian equities after concerns over current account deficits in regional economies surfaced in Aug, and 2) uncertainty over when the Fed will start its tapering of QE.

We expect trading activity to remain muted through the seasonally weak Oct-Dec quarter, as long as concerns likefuture tapering and US shutdown dominate markets. 2HFY14 volumes are likely to pick up as the market regains confidence.

Our FY14 ADVT forecast of S$1.48bn implies a higher S$1.55bn ADVT for 2Q-4QFY14. Also, derivatives volumes should get back on the growth path as clarity on the success of Abenomics comes through (Nikkei 225), China stabilises (A50) and Singapore’s 2014 earnings growth outlook improves (MSCI SG).