SGX market cap dropped $1.5b in battle against Indian bourse

NSE filed a lawsuit to block its new derivatives products.

Amidst battles with the National Stock Exchange of India (NSE), the market cap of the Singapore Exchange (SGX) suffered a blow and has already lost $1.5b. Its share price also fell as hard as 16% to $7.4 from its peak this year at $8.5.

"As this continues to play out in the coming weeks, the outcome is unlikely to be clear, but the share price has clearly reflected most of the negatives and the potential hit on SGX’s bottomline, if the sharp decline in market capitalisation is any indication," said OCBC Investment Research analyst Carmen Lee.

SGX decided to reschedule the launch of its new India derivatives as a lawsuit initiated by the NSE that aims to block the products is headed into arbitration.

However, the correction seems to be "overdone" and has already priced in the potential hit on its earnings.

Lee noted that as of SGX's last results, derivatives accounted for 40% of group revenue, as compared to the average of 30% in 2010-2017. Earnings also hit $292m to $349m or an average of $325m a year.

"With fairly stable core earnings, a committed dividend payout of 28 cents per year, and at its current price of $7.24 as at 31 May 2018, this means a good dividend yield of 3.9% from a debt-free company," Lee said.