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Broker's take: Goldman upgrades Singapore Exchange to a 'buy'

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Goldman Sachs has upgraded the Singapore Exchange (SGX) to "buy" from "neutral" on an improving volume and earnings outlook. It has also raised the target price by 6 per cent to S$8.60.

GOLDMAN Sachs has upgraded the Singapore Exchange (SGX) to "buy" from "neutral" on an improving volume and earnings outlook. It has also raised the target price by 6 per cent to S$8.60.

The SGX has underperformed peers and the Singapore index year to date as earnings expectations were revised down, said the Goldman report, which was issued on Sept 26, 2017, when the SGX was trading around S$7.45 and closed at S$7.31 a share.

Goldman believes the earnings cuts should come to an end and volume recovery will prompt upward revisions to consensus.

Cash equity turnover velocity has stayed low at the SGX (and globally) on rising price levels, which helped volumes, but led exchanges to underperform (as volumes lagged index rises), it said.

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In a context of US Fed tightening, it believes half of the SGX cash market volumes could be subject to more volatility and hence could have higher velocity.

As at 12.12pm, the SGX's share price stood at S$7.45, up one Singapore cent or 0.1 per cent from Tuesday.