Merrill Rates SGX At Sell, Sets Fair Value At S$5

STOCK CALL: Merrill Lynch keeps SGX (S68.SG) at Sell after house''s Pan-Asian Rising Stars Conference in Singapore. Says key takeaways from conference include SGX''s view algorithmic/quant trading is likely next big wave to boost turnover activity on Asian exchanges; algo-trading currently well under 10% of SGX''s total trading activity vs 40%-50% on some other developed market exchanges. Also, notes SGX keeping near-term strategy to attract more overseas listings, especially from China, India, marine sector, and to offer more structured warrants popular with retail investors; says SGX indicates listing pipeline remains healthy but actual IPOs subject to market conditions. Adds, SGX "poured cold water" on chances for M&A among regional exchanges on view most Asian governments will take nationalistic view. Broker adds, "Deciding on the level at which to buy SGX feels much like an attempt to catch a proverbial knife. That said, we think that trading volumes have more downside than upside risks, so would advise investors to wait for better entry levels." Sets SGX''s fair value at S$5.00, equating to 13X FY09E P/E, 45% downside from current levels. Share down 1.1% at S$8.66.