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>Aggregate SGX FX Futures volume hit US$117 billion in October, up 7% y-o-y with open interest at US$12 billion as at end-October</li>
	<li>SGX KRW/USD Mini Futures achieved a record high daily average volume of 4,272 contracts, with a total of over 80,000 contracts traded in the month</li>
</ul>
China’s power crisis and improving China-US relations

Energy shortage remains an issue for China. In a bid to stockpile enough coal for the coming winter months, China has pushed for the expansion of more than 70 coal mines near Inner Mongolia. The government has also called for coal miners to boost output, with targets to produce over 12 million tons of coal per day in the last quarter of 2021.

Relations between China and the U.S. seem to be improving as Chinese Vice-Premier Liu He and US Treasury Secretary Janet Yellen held their second meeting in four months. Both parties discussed and agreed for more communication and coordination of macroeconomic policies given that the world’s economic recovery is at a critical juncture. White house officials are also preparing for a virtual meeting between President Biden and Chinese leader Xi. The meeting is scheduled to happen at year-end, on issues relating to China’s expanding nuclear arsenal and the origins of the pandemic.

 

Chart 1: SGX FX Futures Trading Volume
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SGX USD/CNH Futures: Volumes and month-end open interest up y-o-y in October

<ul>
<li>SGX USD/CNH Futures volume increased 7% y-o-y in October to US$79.4 billion</li>
	<li>Month-end open interest was up 12% y-o-y to US$10.3 billion</li>
</ul>
The tech regulatory scrutiny in China showed signs of easing as officials mentioned that more than half of the fintech fixes have been implemented. China Banking and Insurance Regulatory Commission Chairman Guo Shuqing said that companies affected have responded positively to the feedback and that he expects “even more significant progress” to be made before the end of this year. Optimism from Evergrande’s default aversion along with potential easing of the tech crackdown added to CNY and CNH’s strength.

In response to the rising coal prices, the National Development and Reform Commission said that they are reviewing possible intervention to ease the power crunch. Meanwhile, the government has instructed around 170 mines to boost capacity and removed the annual production limits.  

Hopes on the improving China-U.S. ties has also pushed the CNY close to a 1-month high in early October as the Chinese government mentioned they are in talks with U.S. officials to eliminate tariffs.

Foreigners continue to buy Chinese equities despite concerns over the recent regulatory scrutiny. Debt inflows have also continued and with exports remaining strong, running at 24% year-on-year (“y-o-y”) on a three-month moving average. FX settlement data continue to reflect these strong foreign currency inflows (as shown in chart 3). SGX USD/CNH Futures volume was down 14% month-on-month (“m-o-m”) due to China’s Golden Week holiday, but up 7% y-o-y in October to US$79.1 billion, with month-end open interest up 11% m-o-m and 12% y-o-y to US$10.3 billion.

Chart 2: SGX USD/CNH Futures volume 
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SGX INR/USD Futures daily average volume at 67,450 contracts, surging 20% y-o-y in October

<ul>
<li>SGX INR/USD Futures volumes increased 12% y-o-y in October to US$34.2 billion</li>
	<li>Month-end open interest in notional value at US$1.2 billion, down 7% y-o-y</li>
</ul>
RBI halted its bond purchase under the G-Sec Acquisition Programme (GSAP). RBI Governor Das mentioned that the measure has run its course in ensuring adequate liquidity and established the financial markets, signaling the end of pandemic-era stimulus. RBI also decided to steadily increase the size of 14-day variable rate reverse repo operations through December.

India is also facing a power crunch as escalating coal shortages have impeded India’s electricity supply. Blackouts have been reported across the country and coal reserves are at all-time lows, threatening to derail India’s economic recovery. India’s annual wholesale price-based inflation grew in double digits for the 6th month in a row, fueling concerns of inflationary pressures as energy and raw material costs continue to rise.

Meanwhile, JPMorgan is looking to include India into its emerging-market bond index, which could prompt $25 billion inflows from foreign investors. This comes against the backdrop of more foreign inflows from equities, as Paytm increased its IPO size from 166 billion rupees to 183 billion rupees, providing relief to shield rupee from rising oil prices.

SGX INR/USD Futures volume was down 3% m-o-m but up 12% y-o-y in October to US$34.2 billion, with month-end open interest down 7% y-o-y in notional terms (USD$1.2 billion) or 43,404 contracts.

 

Chart 4: Trading range in SGX INR/USD Futures 
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SGX KRW/USD Futures daily average volume notional up 37% m-o-m in October 2021

South Korea has been seeing rising debt inflows with its overheated housing markets. Although rising debt inflows have been providing some support to the Korean Won, the housing market is also showing signs of cooling after the government introduced home supply plans and measures to curb household debt. In response to surging global oil and energy prices, the government decided to slash domestic tax on key oil products by 20%, while removing tariffs on LNG from 12 November through to April 2022. There are also plans to reduce prices on rice, egg, beef and pork to help reduce headline CPI, indicating a hawkish tilt of the Bank of Korea to anchor inflation expectations.

In October, US$1.8 billion (or 82,357 contracts) of SGX KRW/USD Futures were traded, surging 37% m-o-m and 163% y-o-y. Daily average volume in October 2021 was at a record high of US$97 million, up 37% m-o-m and 163% y-o-y. Month-end open interest was at US$286 million (or 12,938 contracts), down 27% m-o-m but up 157% y-o-y.
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Aggregate SGX FX Futures volume hit US$117 billion in October, up 7% y-o-y with open interest at US$12 billion as at end-October
	SGX KRW/USD Mini Futures achieved a record high daily average volume of 4,272 contracts, with a total of over 80,000 contracts traded in the month

China’s power crisis and improving China-US relations

Energy shortage remains an issue for China. In a bid to stockpile enough coal for the coming winter months, China has pushed for the expansion of more than 70 coal mines near Inner Mongolia. The government has also called for coal miners to boost output, with targets to produce over 12 million tons of coal per day in the last quarter of 2021.

Relations between China and the U.S. seem to be improving as Chinese Vice-Premier Liu He and US Treasury Secretary Janet Yellen held their second meeting in four months. Both parties discussed and agreed for more communication and coordination of macroeconomic policies given that the world’s economic recovery is at a critical juncture. White house officials are also preparing for a virtual meeting between President Biden and Chinese leader Xi. The meeting is scheduled to happen at year-end, on issues relating to China’s expanding nuclear arsenal and the origins of the pandemic.

 

Chart 1: SGX FX Futures Trading Volume



      
    
    202111_1E


SGX USD/CNH Futures: Volumes and month-end open interest up y-o-y in October


SGX USD/CNH Futures volume increased 7% y-o-y in October to US$79.4 billion
	Month-end open interest was up 12% y-o-y to US$10.3 billion

The tech regulatory scrutiny in China showed signs of easing as officials mentioned that more than half of the fintech fixes have been implemented. China Banking and Insurance Regulatory Commission Chairman Guo Shuqing said that companies affected have responded positively to the feedback and that he expects “even more significant progress” to be made before the end of this year. Optimism from Evergrande’s default aversion along with potential easing of the tech crackdown added to CNY and CNH’s strength.

In response to the rising coal prices, the National Development and Reform Commission said that they are reviewing possible intervention to ease the power crunch. Meanwhile, the government has instructed around 170 mines to boost capacity and removed the annual production limits.  

Hopes on the improving China-U.S. ties has also pushed the CNY close to a 1-month high in early October as the Chinese government mentioned they are in talks with U.S. officials to eliminate tariffs.

Foreigners continue to buy Chinese equities despite concerns over the recent regulatory scrutiny. Debt inflows have also continued and with exports remaining strong, running at 24% year-on-year (“y-o-y”) on a three-month moving average. FX settlement data continue to reflect these strong foreign currency inflows (as shown in chart 3). SGX USD/CNH Futures volume was down 14% month-on-month (“m-o-m”) due to China’s Golden Week holiday, but up 7% y-o-y in October to US$79.1 billion, with month-end open interest up 11% m-o-m and 12% y-o-y to US$10.3 billion.

Chart 2: SGX USD/CNH Futures volume 



      
    
    202111_2E

      
    
    202111_3E


SGX INR/USD Futures daily average volume at 67,450 contracts, surging 20% y-o-y in October


SGX INR/USD Futures volumes increased 12% y-o-y in October to US$34.2 billion
	Month-end open interest in notional value at US$1.2 billion, down 7% y-o-y

RBI halted its bond purchase under the G-Sec Acquisition Programme (GSAP). RBI Governor Das mentioned that the measure has run its course in ensuring adequate liquidity and established the financial markets, signaling the end of pandemic-era stimulus. RBI also decided to steadily increase the size of 14-day variable rate reverse repo operations through December.

India is also facing a power crunch as escalating coal shortages have impeded India’s electricity supply. Blackouts have been reported across the country and coal reserves are at all-time lows, threatening to derail India’s economic recovery. India’s annual wholesale price-based inflation grew in double digits for the 6th month in a row, fueling concerns of inflationary pressures as energy and raw material costs continue to rise.

Meanwhile, JPMorgan is looking to include India into its emerging-market bond index, which could prompt $25 billion inflows from foreign investors. This comes against the backdrop of more foreign inflows from equities, as Paytm increased its IPO size from 166 billion rupees to 183 billion rupees, providing relief to shield rupee from rising oil prices.

SGX INR/USD Futures volume was down 3% m-o-m but up 12% y-o-y in October to US$34.2 billion, with month-end open interest down 7% y-o-y in notional terms (USD$1.2 billion) or 43,404 contracts.

 

Chart 4: Trading range in SGX INR/USD Futures 



      
    
    202111_4C


SGX KRW/USD Futures daily average volume notional up 37% m-o-m in October 2021

South Korea has been seeing rising debt inflows with its overheated housing markets. Although rising debt inflows have been providing some support to the Korean Won, the housing market is also showing signs of cooling after the government introduced home supply plans and measures to curb household debt. In response to surging global oil and energy prices, the government decided to slash domestic tax on key oil products by 20%, while removing tariffs on LNG from 12 November through to April 2022. There are also plans to reduce prices on rice, egg, beef and pork to help reduce headline CPI, indicating a hawkish tilt of the Bank of Korea to anchor inflation expectations.

In October, US$1.8 billion (or 82,357 contracts) of SGX KRW/USD Futures were traded, surging 37% m-o-m and 163% y-o-y. Daily average volume in October 2021 was at a record high of US$97 million, up 37% m-o-m and 163% y-o-y. Month-end open interest was at US$286 million (or 12,938 contracts), down 27% m-o-m but up 157% y-o-y.



SGX FX Futures daily average volume grew 17% y-o-y in October; KRW/USD Mini Futures contracts set new daily average volume record

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SGX FX Futures daily average volume grew 17% y-o-y in October; KRW/USD Mini Futures contracts set new daily average volume record

Aggregate SGX FX Futures volume hit US$117 billion in October, up 7% y-o-y with open interest at US$12 billion as at end-October SGX KRW/USD...

Singapore Exchange Ltd (SGX)