Alpha-Centric ESG Research

Kyle Rudden

<ul>
<li>Combating climate change is a global imperative, and is particularly urgent for Southeast Asia which faces a disproportionate share of the adverse physical, social, and economic impacts.</li>
<li>ASEAN nations have demonstrated a strong commitment to climate action and have made real progress in certain areas, but require substantial climate financing to achieve their targets.</li>
<li>All regional ASEAN banks will play a critical role in climate finance, but those at the forefront of sustainable/green finance are poised to benefit from the region's climate transition.</li>
</ul>


Combating climate change is a global imperative, and is particularly urgent for Southeast Asia which faces a disproportionate share of the adverse physical, social, and economic impacts.
ASEAN nations have demonstrated a strong commitment to climate action and have made real progress in certain areas, but require substantial climate financing to achieve their targets.
All regional ASEAN banks will play a critical role in climate finance, but those at the forefront of sustainable/green finance are poised to benefit from the region's climate transition.


Green Banking in ASEAN: An Assessment of ASEAN Banks' Sustainable Finance Policies

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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<ul>
<li>
While the FTSE Indonesia Index has performed in-line with the region over the past three months, its propensity to swing has seen its 30-day historical volatility rise to 30%, three times the current volatility of the broader more diversified FTSE ASEAN All Share Index. 
	 </li>
	<li>
This is partly on the growth of the Financial Sector within the consumer-driven economy. The cyclical Financial sector makes up 49% of the FTSE Indonesia Index, has been driven by recent cues on Indonesia growth, trade, inflation and the current accommodative monetary policy. 
	 </li>
	<li>On 14 September, SGX launched SGX FTSE Indonesia Index Futures Contracts, providing access to the largest Southeast Asia economy and price discovery with screen prices quoted throughout Asia, European and US hours.</li>
</ul>
 On Thursday, the Central Bank of Indonesia, Bank Indonesia (BI), left is benchmark 7 day Reverse Repo rate unchanged at 4.00% while maintaining accommodate policies to mitigate economic impacts of COVID-19. The benchmark rate has been at 4.00% since 16 July, and stood at 5.00% going into 2010. The BI Board of Governors meet monthly, with the next meeting expected to take place on 13 October. Back on 5 August, Indonesia’s printed its first contraction in quarterly YoY GDP growth for the first time since 1998. Badan Pusat Statistik attributed the 2Q20 5.3% YoY decline to the significant economic effects of large-scale lockdowns to contain COVID-19. Indonesia is ASEAN’s largest economy and its consumer-driven GDP represents 1.3% of the global GDP pie. However, Indonesia’s representation in the FTSE All-World Index is comparatively less at 0.2%. 
While its GDP to stock market capitalisation ratio is lower than most, its growing stock market is highly vibrant. The FTSE Indonesia Index 12 month volatility, based on annualised daily log returns through to the end of August was 40%, the highest across the Asia Pacific. Over the past 38 weeks, the FTSE Indonesia Index declined 20.2% in Indonesia Rupiah terms, or 25.5% in USD terms. From the end of 2019 through to the 24 March, the Index declined 51.1% in USD terms, before rallying 64.5% between 24 March and 27 August. Swings Over the Past Six Weeks 
The 30-day historical volatility of the FTSE Indonesia Index reached a high of 79% on 9 April, gradually backing down to 17% on 31 July before returning higher to its current level of 30%. The increase in volatility over the past six weeks is peripheral to the region, with the FTSE ASEAN All Share Index comparatively muted, with its volatility moving from 10.6% to 9.6%. Since the FTSE ASEAN All-Share Index formed its 9 June high, it has gradually consolidated lower, with the regional Index declining 5.8% through to 17 September. As illustrated below, the FTSE Indonesia Index has seen comparatively more swings, over the time period. 
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<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-09/Capture_11.PNG' alt='FTSE Indonesia Index' />
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 <div class='content-caption'>FTSE Indonesia Index</div>
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<html><body>Currently the combined market capitalisation of Indonesia’s stock market is close to US$400 billion which has grown approximately 40% over the past 10 years. During that time Indonesia’s listed Financials Sector has effectively doubled from US$83 billion to S$165 billion. The growth and cyclicality of the financial Sector is captured in the FTSE Indonesia Index, which was weighed 49.1% to the Financial Sector as of the end of August. Bank Central Asia and Bak Rayat Indonesia both maintain the highest stock weightings within the Index. The Index maintains a 10 year 0.5 Return-to-Risk Ratio based on compound annual returns and volatility. 
FTSE Indonesia Index Futures 
SGX FTSE Indonesia Index Futures commenced trading with a commendable bid-offer spread of 29 basis point in its September 2020 contract,  with a notional trading volume of US$550k to date.  With the presence of dedicated market makers to provide continuous quoting throughout the day, SGX FTSE Indonesia Index Futures has the most competitive screen performance where market participants can execute an order valued at US$130K at top of the order book (TOB). SGX data, 5 min snapshot excluding first 15 minute block when onshore market opens on 17 Sep 2020</body></html>

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-09/Capture%201_1.PNG' alt='SGX FTSE Indonesida Sep '20 Contract Order Book' />
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 <div class='content-caption'>SGX FTSE Indonesida Sep '20 Contract Order Book</div>
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<html><body>For more information on SGX FTSE Indonesia Index Futures Contract, please refer to the following link: <a href="https://www.sgx.com/derivatives/products/sgxidftse?cc=FID">SGX FTSE Indonesia Index Futures</a></body></html>





While the FTSE Indonesia Index has performed in-line with the region over the past three months, its propensity to swing has seen its 30-day historical volatility rise to 30%, three times the current volatility of the broader more diversified FTSE ASEAN All Share Index. 
	 
	
This is partly on the growth of the Financial Sector within the consumer-driven economy. The cyclical Financial sector makes up 49% of the FTSE Indonesia Index, has been driven by recent cues on Indonesia growth, trade, inflation and the current accommodative monetary policy. 
	 
	On 14 September, SGX launched SGX FTSE Indonesia Index Futures Contracts, providing access to the largest Southeast Asia economy and price discovery with screen prices quoted throughout Asia, European and US hours.

 On Thursday, the Central Bank of Indonesia, Bank Indonesia (BI), left is benchmark 7 day Reverse Repo rate unchanged at 4.00% while maintaining accommodate policies to mitigate economic impacts of COVID-19. The benchmark rate has been at 4.00% since 16 July, and stood at 5.00% going into 2010. The BI Board of Governors meet monthly, with the next meeting expected to take place on 13 October. Back on 5 August, Indonesia’s printed its first contraction in quarterly YoY GDP growth for the first time since 1998. Badan Pusat Statistik attributed the 2Q20 5.3% YoY decline to the significant economic effects of large-scale lockdowns to contain COVID-19.  Indonesia is ASEAN’s largest economy and its consumer-driven GDP represents 1.3% of the global GDP pie. However, Indonesia’s representation in the FTSE All-World Index is comparatively less at 0.2%.  
While its GDP to stock market capitalisation ratio is lower than most, its growing stock market is highly vibrant. The FTSE Indonesia Index 12 month volatility, based on annualised daily log returns through to the end of August was 40%, the highest across the Asia Pacific. Over the past 38 weeks, the FTSE Indonesia Index declined 20.2% in Indonesia Rupiah terms, or 25.5% in USD terms. From the end of 2019 through to the 24 March, the Index declined 51.1% in USD terms, before rallying 64.5% between 24 March and 27 August.  Swings Over the Past Six Weeks  
The 30-day historical volatility of the FTSE Indonesia Index reached a high of 79% on 9 April, gradually backing down to 17% on 31 July before returning higher to its current level of 30%. The increase in volatility over the past six weeks is peripheral to the region, with the FTSE ASEAN All Share Index comparatively muted, with its volatility moving from 10.6% to 9.6%. Since the FTSE ASEAN All-Share Index formed its 9 June high, it has gradually consolidated lower, with the regional Index declining 5.8% through to 17 September. As illustrated below, the FTSE Indonesia Index has seen comparatively more swings, over the time period. 



      
    
    FTSE Indonesia Index

Currently the combined market capitalisation of Indonesia’s stock market is close to US$400 billion which has grown approximately 40% over the past 10 years. During that time Indonesia’s listed Financials Sector has effectively doubled from US$83 billion to S$165 billion. The growth and cyclicality of the financial Sector is captured in the FTSE Indonesia Index, which was weighed 49.1% to the Financial Sector as of the end of August. Bank Central Asia and Bak Rayat Indonesia both maintain the highest stock weightings within the Index.  The Index maintains a 10 year 0.5 Return-to-Risk Ratio based on compound annual returns and volatility.  
FTSE Indonesia Index Futures  
SGX FTSE Indonesia Index Futures commenced trading with a commendable bid-offer spread of 29 basis point in its September 2020 contract,  with a notional trading volume of US$550k to date.  With the presence of dedicated market makers to provide continuous quoting throughout the day, SGX FTSE Indonesia Index Futures has the most competitive screen performance where market participants can execute an order valued at US$130K at top of the order book (TOB).  SGX data, 5 min snapshot excluding first 15 minute block when onshore market opens on 17 Sep 2020


      
    
    SGX FTSE Indonesida Sep '20 Contract Order Book

For more information on SGX FTSE Indonesia Index Futures Contract, please refer to the following link: SGX FTSE Indonesia Index Futures


FTSE Indonesia Index Futures Launches Amidst Recent Uptick in Volatility 

Indonesia

PT Bank Central Asia Tbk provides banking and related services.  The Bank also provides custodianship, trusteeship, and management of pension funds of financial institutions.  Through its subsidiaries, the Bank also provides leasing and consumer financing services.

Bank Central Asia (BBCA IJ)

Green Banking in ASEAN: An Assessment of ASEAN Banks' Sustainable Finance Policies

ASEAN needs billions (probably trillions) in climate finance, and ASEAN banks are poised to play a vital role. This is an assessment of sustainable...

Kyle Rudden

FTSE Indonesia Index Futures Launches Amidst Recent Uptick in Volatility

While the FTSE Indonesia Index has performed in-line with the region over the past three months, its propensity to swing has seen its 30-day...

Singapore Exchange Ltd (SGX)