ASX downgraded to Hold

Recent market volatility has helped volumes at ASX Ltd.

The recent volatility in financial markets doesn’t seem to have hurt ASX Ltd. The average value of shares traded on the sharemarket was up 5% in June, compared to last year, and 8% in 2016 financial year. Derivative volumes were up 17% in June and 8% for the year. There’s also good news for the ASX’s new business clearing over-the-counter (‘OTC’) derivatives, which handled $645bn in the year, compared to $102m in 2015.

The share price has risen 14% since ASX to face clearing competition – maybe on 30 Mar 16 (Buy – $41.14) and is 57% ahead of our original upgrade, back in 2012, giving a total return of about 80% including dividends. It's also now comfortably past our $45 Buy price. The stock is now on a price-earnings ratio of 21.5 and a fully franked dividend yield of 4.2%, based the $2.18 of earnings per share expected for 2016 and the anticipated payout of $1.96. That’s attractive, but we’d like to see it a bit cheaper to Buy, so we’re downgrading to Hold. We're nudging up our Sell price, however, to $65. HOLD.

Note: The Intelligent Investor Equity Income and Growth portfolios own shares in ASX. You can find out about investing directly in Intelligent Investor and InvestSMART portfolios by clicking here.

Disclosure: The author owns shares in ASX.

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