SGX’s trading volume spike unsustainable, warns CIMB

The surge was driven by rumours.

The recent spike in the local bourse’s average securities trading volume cannot be sustained in the medium term, according to a report by CIMB.

CIMB noted that SGX is trading at its historical mean price-earnings ratio of 23x, implying that the market expects securities average daily value traded (ADVT) to revert to its mean of $1.3b to $1.5b.

In the third quarter, SGX reported that securities ADVT improved 8% to $1.2b, fuelled by market speculation that a China-Singapore Stock Connect would materialise. However, the SGS has shot down such rumours.

“Current valuations suggest that the market is pricing in a sustained recovery in securities trading volumes – a scenario that we believe is not likely in the medium term,” stated CIMB.