>> ASIAONE / NEWS / THE STRAITS TIMES / STORY

SGX contracts active on recent share price swings
Alvin Foo Mon, Feb 18, 2008 The Straits Times
THE recent volatility of Singapore Exchange (SGX) shares is drawing traders into fresh positions on the exchange's warrants. SGX shares have fallen almost 30 per cent so far this year, closing 14 cents lower at $9.49 last Friday. In comparison, the Straits Times Index has retreated just 11 per cent for the year. 'The drop in the turnover in equity markets since the beginning of 2008 has caused some concerns among investors that the exchange may not be able to sustain the impressive growth it achieved over the past few years,' Mr Ooi Lid Seng, Societe Generale's (SG's) vice-president of structured products for Asia, excluding Japan, said. Last month, Citigroup slashed its SGX target price from $11.22 to $6.45. It expects a fall in average daily market turnover in Singapore and has trimmed its SGX profit forecast.

Earlier this month, the SGX reported a 43.9 per cent increase in net profits to $156.4 million for the quarter ended Dec 31 on a 63 per cent revenue jump to $203.5 million.

The strong performance across its revenue streams and the receipt of a one-time distribution helped the exchange.

Mr Ooi highlighted an SGX warrant offered by SG.

Investors with a positive view on the SGX may consider an SG call warrant with a strike price of $9.65 that expires on June 30.

Last Friday, that warrant was the most active SGX contract offered by SG. It closed two cents lower at 30 cents, with 1.4 million units traded.

Mr Ooi thinks the technical outlook for the SGX is neutral, noting that its shares appear to be fluctuating within a trading range.

He added: 'If it can sustain above its current level, it may proceed to test the $10 resistance in the coming days.

'But if the share should weaken, some support can be seen around $8.70.'

A call warrant lets an investor buy into a stock or index at a pre- set price over a period of three to nine months.

A put warrant allows an investor to sell the stock or index at a pre-set price over a fixed period of time.

alfoo@sph.com.sg