MARKETS SPECTATOR: ASX Ltd ticks the yield box

A rising market lifts many boats, including ASX Ltd. At 1123 AEST ASX was up 36 cents, or 1 per cent, to $37.97 after the operator of the Australian stock and derivatives market said its revenue in the three months to March 31 rose 9.5 per cent to $152.3 million.

The value of the daily average trading volumes for February and March has been well over $5 billion, an improvement from January where it was barely $4 billion and December where it was under $4 billion despite signs the S&P/ASX 200 Index was on a tear.

The turnaround in ASX Ltd’s business is reflected across all its business units. In the three months to March all reported revenue increases. Derivatives revenue, which accounts for almost a third of ASX Ltd’s sales, rose 15 per cent to $50 million. Cash market revenue rose 2.4 per cent to $29.2 million. Listing and issuer services gained 12 per cent to $31.9 million.  

Such is the improvement in the ASX Ltd stock price, its shares have gained 25 per cent in the last 12 months. That is, market value as of March, $6.3 billion, was bigger than the London and Singapore exchanges.

If the S&P/ASX 200 Index, up 17 per cent in the last 12 months, exhibits signs of volatility, ASX Ltd’s earnings are likely to remain robust. Individual investors, who make up about a third of all ASX Ltd trading, seem to have cast off their disillusion with stocks following the market’s bull run. Superannuation fund inflows, which will increase from July 1 as mandatory contributions into the scheme increase, will underpin market activity.

Moreover the ASX Ltd’s yield, now about 5 per cent, is perhaps safer than the banks. The ASX is essentially a monopoly. In a market where yield is king, the ASX is ticking the right box as its fundamental business improves.