SGX Set for Strong Growth as Market Reforms and IPO Boom Take Hold
The Singapore Exchange Group (SGX) is riding high after the bellwether Straits Times Index (STI) climbed 2.2% month-on-month in November, pushing year-to-date calendar gains to 19% and total returns to a healthy 25%.
Total traded value for securities jumped 17.8% year-on-year, while total derivative contract volume dipped slightly by 0.7% year-on-year. Securities daily average traded value and derivative average daily volume rose 23.7% and 4.3% year-on-year, respectively.
UOB Kay Hian (UOBKH) is maintaining a “hold” recommendation on SGX but has bumped up its target price to $17.30 from $16.66 previously.
Derivatives Outperform Expectations
For the July-November period, total traded value for securities surged 19.3% year-on-year, outpacing UOBKH’s full-year projection of 16% growth. Derivatives volumes also exceeded expectations, with commodity and currency derivative contracts up 21.1% and 12.4% year-on-year, respectively—well above the research house’s mid-single-digit growth forecasts.
The commodity outperformance was driven mainly by iron ore contracts amid geopolitical uncertainty and expectations of stronger infrastructure spending in China.
In currency derivatives, INR/USD futures led the charge, with traded volume jumping 43.0% year-on-year, supported by robust Indian equity inflows and strong hedging demand against a volatile rupee.
Analyst Roy Chen says: “We expect the MAS Equity Market Development Programme (EQDP) to continue driving trading activities in the Singapore equity market, while macro and geopolitical uncertainties should sustain hedging demand in derivatives.”
However, he cautioned that year-on-year growth is likely to moderate—securities traded value growth should ease to low-teens in the second half of FY2026, while derivatives volumes should see flattish to low single-digit growth, given the elevated base created by the initial EQDP boost and heightened volatility amid the US-China tariff war.
While Chen maintains his “hold” call on SGX due to its current price being close to his target, he still likes SGX’s resilient multi-asset business model and believes SGX’s value will rise over time. “Investors should accumulate SGX on share price dips,” he adds.
Maybank Says “Buy”
Maybank Research Singapore, on the other hand, is recommending investors “buy” SGX with a higher target price of $18.81 from $17.67 previously.
Analyst Thilan Wickramasinghe says: “Strong November equity market data affirms our belief that SGX is structurally shifting to a higher ADV (average daily value) operating environment. With equity opex largely stable, this allows for significant upside earnings risks as operating leverage flows through.”
“Market reforms promises to improve valuations and establish Singapore as a regional equities centre. SGX should be the first-degree beneficiary of these shifts, which could also drive upside dividend surprises in 2HFY2026,” Wickramasinghe adds.
A New Normal for Trading Volume
Over the past decade, SGX’s average daily value (ADV) has averaged $1.2 billion. November’s market ADV hit $1.8 billion—a whopping 71% higher compared to January, just before the first MAS market reform recommendations were announced.
Wickramasinghe believes that confidence surrounding reforms, together with safe haven liquidity flows to Singapore, have created a new, higher ADV base for SGX. The latest recommendations reforming market microstructure could further increase liquidity from retail investors, while the EQDP programme should boost institutional investor demand next year.
IPO Momentum Building
Meanwhile, rising IPO momentum could turbocharge flows even further. In the first half of FY2025, there was only one new listing, whereas the July-November period saw eight IPOs. Funds raised also exploded from just $6 million to $2.3 billion.
“The last time we observed a similar level of IPOs was 13 years ago. We believe there is a structural shift in confidence for SGX as a listing venue. This could extend Singapore’s regional financial centre standing into equities as well, in our view,” says Wickramasinghe.
He also believes the proposed SGX-NASDAQ dual listing bridge could further entrench regional listing flows to Singapore.
Separately, while execution is yet to be seen, the proposed ‘Value Unlock’ programme could unleash latent valuation multiples over the medium term. He estimates 15 IPOs in FY2026 and 23 in FY2027.
“In 2HFY2026, we believe there may be upside surprise risks to dividends given stronger operating leverage, and structural reshaping of SGX’s operating environment,” Wickramasinghe adds.
As at 2.40pm, shares in SGX were trading at $16.89, up 35% year-to-date.
Source: The Edge Singapore
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