ASX Details
Fall in capital raised as per November activity: ASX Ltd (ASX: ASX) recently reported that total capital raised in the exchange was $5.5 billion which fell in the month of November 2016 by 30% against November 2015. All Ordinaries Index, which is a measure of ASX-listed stocks rose 1.9% after losing 2.2% in October 2016 while other global markets performed better. Japan and US rose 5.1% and 3.4%, respectively while Singapore was up 3.2%. On the other hand, in November 2016, the average daily number of trades was 27% higher than the prior corresponding period (pcp). The average daily value traded on-market of $4.7 billion was 15% higher than the pcp. Average daily futures and options on futures volumes surged 18% in the month from same period of last year while average daily futures volume enhanced 18% and average daily options volume slipped by 27%. Notional value of OTC interest rate derivative contracts centrally cleared was $445 billion up from $188 billion in the prior corresponding period. Participant margin balances held on balance sheet at month-end totaled $5.8 billion in November 2016 against $4.6 billion in November 2015. Average daily number of exchange-traded options rose 31% on pcp after losing 1% in October over pcp 


Listings and capital raisings (Source: Company Reports)
 
Heavy infrastructure investments could be a challenge: The group ismaking heavy investments in infrastructure to meet global industry standards which include the development of distributed ledger technology – or ‘blockchain’ – as a possible replacement for CHESS. Despite CHESS replacement project, the group is also investing on a new futures trading platform, as a part of ASX’s technology transformation program. For October 2016, value of securities held in CHESS rose 9% as compared to the prior corresponding period while number of dominant settlement messages rose 4% from the same period of last year. ASX reported expenses rise of $10.5 million for financial year of 2016. In November 2016, value of securities held in CHESS rose 12% over pcp while number of dominant settlement messages rose 18% from the same period of last year.
 

FY16 highlights (Source: Company Reports)
 
Stock performance: ASX stock rallied over 14.6% this year to date (as of December 20, 2016). However, the stock has only risen 2.34% in last three months (as of December 20, 2016) given the rising costs on infrastructure coupled with increasing concerns over competition from Chi-X. Further, Australia’s securities regulator (ASIC) now aims to conduct a wider review of risk management by ASX as a hardware failure on September 19, 2016 in the ASX’s trading systems led to many technical and operational issues resulting in trading delays. This step has come at the back of the fact that Australian equity markets are completely dependent on ASX systems. Moreover, ASX stock is currently trading at a higher P/E and we believe investors need to leverage the recent rise as a profit booking opportunity. We give a “Sell” recommendation at the current price of - $ 49.03

 
ASX Daily Chart (Source: Thomson Reuters)

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