DBS downgrades SGX to ‘hold’, lowers target price to S$20
The bank trims earnings forecasts, flagging cooling securities turnover and moderating derivatives growth
DBS Group Research has revised its outlook on Singapore Exchange (SGX), downgrading the stock from "buy" to "hold" and reducing the 12-month target price from S$26.40 to S$20. Analyst Rui Wen Lim cited a slowdown in growth momentum in equities and derivatives, which have seen two years of record performance. The revised target price implies a potential 3.5% downside from Monday's closing price of S$20.73, and DBS lowered earnings per share estimates by 4-5% for FY2028, about 4% below market consensus.
The new multiple of 25 times projected FY2028 price-to-earnings is one standard deviation above SGX's historical forward multiple. While SGX's securities trading activity remains robust compared to historical levels, sequential momentum has started to weaken. Securities daily average value rose 33% year-on-year in Q1 FY2027 but fell 8% quarter-on-quarter from Q4 FY2026.
Monthly turnover has fluctuated, declining from S$2.4 billion in June to S$2 billion in September. Lim also noted that equity turnover quality and sustainability have become a concern, with the STI outperforming other indices and large-cap financial stocks dominating trading. SGX's derivatives business growth has slowed after two years of double-digit expansion, with derivatives daily average volume growing 5% year-on-year in Q1 FY2027 but falling 11% quarter-on-quarter.
The mixed performance across derivatives asset classes, with a significant increase in foreign exchange futures and declines in other asset classes, adds to the downside risks. Potential catalysts for a re-rating include further capital management initiatives and information on the Central Provident Fund's new investment scheme slated for 2028.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
