Citigroup raises profit forecast; Australian exchange operator's stock price rises

Reuters, October 8 - On Thursday, shares of Australian Securities Exchange operator ASX Ltd (ASX.AX) surged to a near two-month high after Citigroup raised its annual profit forecast for the company, saying that strong first-quarter performance is expected to continue driving robust market activity through the first half of this year.

Details are as follows:

• The exchange operator saw a 16% year-on-year increase in average daily trading volume in its spot market in September.

• Citi analysts stated that daily futures trading volume in the month climbed 44%, approaching historical highs, which may reflect structural and cyclical factors, including interest rate outlook and changes in the bond market.

• Citi added that strong market activity is expected to persist at least through the first half of the year, and as a result, ASX's annual earnings per share forecast was raised by 2%.

• Citi noted that on the downside, corporate market activity remained subdued in September, but with Glencore's GLEN.L planning a secondary listing in October, as well as Firmus's planned initial public offering (IPO) in October, a near-term boost to market activity is anticipated.

• Both Citi and UBS raised their target price for ASX from A$60.10 and A$64.20 respectively to A$61.00 and A$65.50.

• Meanwhile, Goldman Sachs maintains a cautious stance towards new CEO Anthony Attia's (link) strategy and the company’s potential future financial situation.

• Goldman also remains watchful of execution risks in the exchange operator’s CHESS system replacement and technology modernization plans, after the central bank stated in September that the company's clearing and settlement facilities had not met expectations (link).

• ASX shares closed up 3.8%, hitting a near two-month high and ranking among the best performers on the S&P/ASX 200 Index.

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