Declining SDAV levels to impact SGX revenue: UOB Kay Hian

The analyst sees a 15% to 20% drop in securities daily turnover value levels.

The drop in securities daily turnover value levels (SDAV) may impact the Singapore Exchange’s (SGX) annual revenue and earnings, financial services company, UOB Kay Hian, said.

Due to high inflation and interest rate hikes, UOB Kay Hian said it has suppressed SDAV levels because investors expect lower corporate earnings.

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As of the end of April 2022, UOB said SDAV is at $1.25b as it sees a 15% to 20% drop in SDAV levels before seeing a potential rebound in trading activity. 

The financial services firm said it is in line with their expectations as they had already expected SDAV to soften from elevated levels in the first quarter of 2022 due to the Ukraine-Russia war.

“Thus, as the cash equities segment historically accounts for 35% to 40% of SGX’s annual revenue, we expect revenue from this segment to moderate going forward, and drag down SGX's overall revenue and earnings,” UOB Kay Hian explained.

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It also said it maintains its “hold” advice with an unchanged target price of $9.33 for SGX, adding that it remains “fairly valued at current price levels.”