Singapore: SGX's surge helps STI cross 3,500 as penny punting continues

A CONTINUATION of the surge in the shares of the Singapore Exchange (SGX) was one of the highlights of trading on Tuesday, the others being a sudden 36.69 points or 1.05 per cent upward thrust in the Straits Times Index to 3,521.88 and a continued focus on low-priced penny stocks with all 20 most active stocks for the day priced below S$0.20.

SGX's S$0.23 or 2.7 per cent jump to S$8.63 on volume of 11 million contributed 2.1 points towards the Straits Times Index's final gain and, as was the case over the past few days when the stock has been running upwards, prompted market watchers to ask why there was no query from SGX's regulator, the Monetary Authority of Singapore (MAS).

Since closing at S$7.91 last Wednesday, SGX's shares have shot up 9 per cent in elevated volume, leading many to wonder about the sudden interest.

Last week Macquarie Equities Research (MER) issued an "outperform" on the counter with S$8.50 target on speculation that there could be a Singapore-China connection within the next 12-18 months. "Why will China choose Singapore/SGX? - (i) Good relationship with China. Singapore was the 2nd - after Hong Kong - to offer RMB clearing services. (ii) Sufficient RMB liquidity. As one of the top offshore RMB hubs, Singapore would have the ability to clear these transactions settled in RMB" said MER.

"What does SGX have to offer China investors? - (i) Reits and business trusts. The high dividend yields could attract them. (ii) China-related companies listed on SGX. China investors have shown - for now - a preference for familiar names. (iii) Asean exposure. Companies in Asean (Indonesia, Thailand) could offer higher earnings growth potential compared to China."