SGX's securities average daily value fell 7.11% in July to $1.11b

The FIFA World Cup has weakened trading volumes.

The Singapore Exchange’s (SGX) securities average daily value (SADV) in July 2018 hit $1.11b, 7.11% lower compared to last year possibly due to the FIFA World Cup, RHB Research said.

According to a research note, SGX recorded a SADV of $1.24b in FY2018, which is already higher than the brokerage’s expectations of $1.2b and FY2017’s total of $1.12b. “Looking ahead, we are bullish on SADV and have assumed FY2019 SADV of $1.39b,” analyst Leng Seng Choon added.

“Global developments, including further hikes in the US Federal (Fed) funds rate (FFR) and trade war concerns, could stimulate more switching of stock holdings in investors’ portfolios and in turn generate trading volume,” Leng said.

Meanwhile, the SGX’s derivatives average daily volume (DADV) of 820,000 was 11% lower QoQ but was 14% higher YoY. “The sequentially weaker trend was largely attributed to QoQ weaker trading volumes for the China A50 Index Futures,” Leng said.

The analyst expects a similar DADV for FY2019, taking into consideration the “adverse impact” from the trading of Nifty 50 Index Futures – which accounts for 11% of total derivatives traded volume.

RHB Research forecasts a net profit growth of 9.7%. “SGX is in a net cash position and has a monopoly over the trading of Singapore equities,” it said.

However, it cited key risks such as global economic fluctuations and geopolitical developments. “The outcome of the arbitration between SGX and IISL could also impact future derivatives trading volume and hence earnings,” it added.