SGX's cash equity business will continue to underperform: RHB

In February, the bourse's derivatives daily average volume dropped 3% YoY.

Singapore Exchange (SGX) will likely continue to see a weakening of its cash equity business amidst decelerating global growth, RHB said.

In a report, RHB said SGX's securities daily average value (SDAV) and derivatives daily average volume (DDAV) based on operating data until February are tracking below their forecast. 

In February, SGX's total securities market turnover value was $22.1b or 25% lower year-on-year, whilst its SDAV stood at $1.11b or 33% lower year-on-year.

"The YTD securities market turnover value and SDAV for FY23 are tracking 11% and 10% below the numbers for the same period in FY22," RHB commented.

"The implied FY23F SADV, based on data through February, is 2.6% below our estimate," RHB added.

Whilst the bourse's derivatives traded volume increased 7% YoY to 19.9m contracts, its DDAV still fell 3% YoY and 1% MoM, amounting to 1.00m.

"The implied FY23F DADV, based on data through February, is 3.4% below our estimate. Accordingly, we lower our FY23F DDAV estimates by 1.4%," RHB said.

Given these factors, RHB has lowered its FY23F-25F profit forecast for SGX by 3%.

"While we expect growth to resume in FY24F, the near-term outlook for cash equities remains weak amidst low market valuations and an uncertain macroeconomic outlook," RHB commented.