SGX Loses $4.2 Billion as Analysts Warn of Overvaluation

Singapore Exchange Ltd. (SGX) has seen a significant drop in market value, losing about $4.2 billion since its peak in August. The decline comes amid rising concerns over the exchange's lofty valuations, with analysts expressing skepticism.

Citigroup Inc. recently lowered its price target for SGX and placed it on a 90-day “negative catalyst watch,” maintaining a sell rating. JPMorgan Chase & Co. and Macquarie also downgraded their ratings, with JPMorgan moving to neutral and Macquarie to underperform. SGX’s stock has fallen 19% since its record high on August 26, making it the worst performer on Singapore’s Straits Times Index during this period.

The exchange had previously been a top performer, benefiting from growing institutional interest in the local equity market. However, Citi analyst Yong Hong Tan noted that stock trading has become increasingly concentrated in the big banks, posing a key market risk. “Given the global banks’ selloff, the STI could be vulnerable to banks’ volatilities,” Tan wrote in a note.

Despite the sharp selloff, SGX shares still trade at almost 26 times their 12-month forward projected earnings, compared to a 10-year average of 22 times and a valuation multiple of around 16 times for the STI benchmark. Citi also cut its earnings estimates for SGX, citing sluggish iron-ore trading as a potential drag on derivatives contract fees. The bank lowered its price target to S$17.70 per share, implying a potential downside of nearly 16% from Friday’s close. SGX’s stock fell as much as 2.1% on Monday, following a more than 7% decline in the previous session.