ASX

A few good things have happened for ASX since our three-part series in November, culminating in ASX: Competition cuts in – Pt 3 on 28 Nov 12 (Long Term Buy – $29.32).

The most obvious development has been the bid for NYSE Euronext by IntercontinentalExchange (also known as ICE). This has highlighted the attractions of securities exchanges, particularly derivatives exchanges, with Liffe (formerly the London International Financial Futures and Options Exchange) being the main target – but of course it has little effect on their underlying value.

There has, however, also been some good news on value, with sharemarket sentiment continuing to improve (albeit from a very low base) and derivatives volumes powering ahead: in December average daily futures and options on futures volumes on ASX 24 were 30% ahead of December 2011.

ASX was also reported before Christmas to have signed agreements with seven major banks (believed to be the big four, plus Macquarie and two international banks) for the clearing of over-the-counter interest rate derivatives.

All this is why we’ve been slow to downgrade the stock, despite it passing the relevant trigger point in our price guide. But with the price now 9% ahead of that level, it’s time to move. We’re increasing our Long Term Buy range up to $32 and we won't officially upgrade again until the share price falls well below that level. For now we're downgrading to HOLD.

Note: The model Income portfolio owns shares in ASX.