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

Sunny Optical Technology Group / Equity Bottom-Up

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Investors can now gain exposure to Hang Seng TECH Index (HS TECH) via new SGX-listed DLCs and Warrants. DLCs and Warrants are leverage instruments for investors seeking to capture short-term trends on the underlying index for both long and short directions. 
	 </li>
	<li>
Issued by Societe Generale, the 5x Long and Short DLCs on HS TECH started trading on 19 February. The DLCs offer a fixed leverage of 5x the daily performance of the underlying index i.e. a 1% move in HS TECH translates into a 5% move in the DLC on a close-to-close basis.   
	 </li>
	<li>Issued by Macquarie Bank, Call and Put Warrants on HS TECH started trading on 22 February. The warrants offer an effective leverage of approximately 10 times on the underlying index performance and are generally priced below $0.20 per unit. </li>
</ul>
 

Daily Leverage Certificates (“DLCs”) and Structured warrants (“Warrants”) are financial instruments issued by a third-party financial institution, usually investment banks, and are traded in the SGX securities market. DLCs and Warrants offer investors an alternative instrument to participate in the price performance of an underlying asset at a fraction of the underlying asset price. Any failure of the issuer or guarantor to perform obligations when due (e.g. issuer becomes insolvent), may result in the loss of an entire investment. HS TECH outperforms HSI and HSCEI with +56% return since its launch 
Since its launch on 27 July 2020, the Hang Seng TECH Index (HS TECH) has outperformed the Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) by a wide margin. As shown in the chart below, HS TECH returned +56% between 27 July 2020 and 19 February 2021 compared to HSI’s +25% and HSCEI’s +20%. Given the more concentrated portfolio in the technology sector, it is not surprising that HS TECH has outperformed the broad based market indices such as HSI and HSCEI amidst the market rally since the start of 2021.  
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<figure>
 <img src='https://api2.sgx.com/sites/default/files/2021-02/Capture_15.PNG' alt='Index Performance' />
 </figure>
 <div class='content-caption'>Index Performance</div>
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<html><body>According to the factsheet provided by Hang Seng Indexes, HS TECH includes the 30 largest technology companies listed in Hong Kong that are classified under Industrials, Consumer Discretionary, Healthcare, Financials or Information Technology industries and are considered innovative by operating a technology-enabled business, with strong Research &amp; Development investment or exhibit high revenue growth. 
The Index is free-float market capitalization weighted with 8% cap on individual constituent weighting. The top 5 constituents are Meituan-W, Sunny Optical, Tencent, BABA-SW and JD Health as of January 2021. Click <a href="https://www.hsi.com.hk/eng/indexes/all-indexes/hstech?force_isolation=true">here</a> to read more. HS TECH exhibits higher volatility than HSI and HSCEI 
The potential for higher returns comes with higher volatility on the concentrated HS TECH index compared to more broad base market indices like the HSI and HSCEI. As shown in the chart below, HS TECH exhibited a 30-Day volatility of 39% compared to HSI's 22% and HSCEI’s 22%. Volatility is a measure of the risk of price moves for the index based on the standard deviation of day-to-day logarithmic historical price changes. The 30-Day volatility is the annualized standard deviation of the relative price change for the 30 most recent trading days, expressed as a percentage.</body></html>

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2021-02/Capture_16.PNG' alt='30 Day Volatility' />
 </figure>
 <div class='content-caption'>30 Day Volatility</div>
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Since end December 2020, the 30-Day volatility has also been rising which may be ideal for day traders or generally investors who have a short-term view of the market. The newly listed DLCs and Warrants are specifically designed to be traded on a short-term basis – offering leverage exposure for potential magnified returns (or losses), capital efficiency and flexibility to take a long or short position – therefore they are ideal instruments for investors to take full advantage of the day-to-day market swings, even if volatility starts to slow down. Specifications of New DLCs on HS TECH 
There are two types of DLCs –  a Long DLC and a Short DLC.  Long DLCs are for investors who have a bullish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go up). Short DLCs are for investors who have a bearish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go down). A summary of the terms of the new DLCs is tabled below.

<table class="table table-striped"><tbody>
<tr>
<td>
			Counter name
			</td>
			<td>
			Code
			</td>
			<td>
			Underlying index 
			</td>
			<td>
			Type
			</td>
			<td>
			Leverage 
			</td>
			<td>
			Issue Price (S$)
			</td>
			<td>
			Expiry Date
			</td>
		</tr>
<tr>
<td>
			HSTECH 5xLongSG230216
			</td>
			<td>
			CXDW
			</td>
			<td>
			Hang Seng TECH Index
			</td>
			<td>
			LONG
			</td>
			<td>
			5x
			</td>
			<td>
			2.50
			</td>
			<td>
			16 Feb 2023
			</td>
		</tr>
<tr>
<td>
			HSTECH 5xShortSG230216
			</td>
			<td>
			CWEW
			</td>
			<td>
			Hang Seng TECH Index
			</td>
			<td>
			SHORT
			</td>
			<td>
			-5x
			</td>
			<td>
			2.50
			</td>
			<td>
			16 Feb 2023
			</td>
		</tr>
</tbody></table>
 Source: SGX

 

Investors are advised to read the issuer documents found on SGX website <a href="https://www.sgx.com/securities/company-announcements?value=SG%20ISSUER&amp;type=company">here</a> or the issuer’s DLC website <a href="DLC.socgen.com">here</a> for the full details of the DLCs including the product features (e.g. compounding effect and airbag mechanism) and the risks before investing in the DLCs. Specifications of New Warrants on HS TECH 
Similarly, there are two types of Warrants – a Call Warrant and a Put Warrant. Call warrants are for investors who have a bullish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go up). Put warrants are for investors who have a bearish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go down). A summary of the terms of the new Warrants is tabled below.

<table class="table table-striped"><tbody>
<tr>
<td>
			Counter name
			</td>
			<td>
			Code
			</td>
			<td>
			Underlying Index
			</td>
			<td>
			Type
			</td>
			<td>
			Exercise Level 
			</td>
			<td>
			Expiry Date
			</td>
		</tr>
<tr>
<td>
			HSTECH 12300 MB ECW210429
			</td>
			<td>
			IQTW
			</td>
			<td>
			Hang Seng TECH Index
			</td>
			<td>
			CALL
			</td>
			<td>
			12300
			</td>
			<td>
			29 Apr 21
			</td>
		</tr>
<tr>
<td>
			HSTECH 9300 MB EPW210429
			</td>
			<td>
			YF7W
			</td>
			<td>
			Hang Seng TECH Index
			</td>
			<td>
			PUT
			</td>
			<td>
			9300
			</td>
			<td>
			29 Apr 21
			</td>
		</tr>
<tr>
<td>
			HSTECH 14000 MB ECW210629
			</td>
			<td>
			ICYW
			</td>
			<td>
			Hang Seng TECH Index
			</td>
			<td>
			CALL
			</td>
			<td>
			14000
			</td>
			<td>
			29 June 21
			</td>
		</tr>
<tr>
<td>
			HSTECH 8000 MB EPW210629
			</td>
			<td>
			V6EW
			</td>
			<td>
			Hang Seng TECH Index
			</td>
			<td>
			PUT
			</td>
			<td>
			8000
			</td>
			<td>
			29 June 21
			</td>
		</tr>
</tbody></table>
 Source: SGX

 

Investors are advised to read the issuer documents found on SGX website <a href="https://www.sgx.com/securities/company-announcements?value=MACQUARIE%20BANK%20LIMITED&amp;type=company">here</a> or the issuer’s warrant website <a href="https://www.warrants.com.sg/home">here</a> for the full details of the warrants including the product features and the risks before investing in them. 
Investors should note these Warrants/DLCs will track the moves in the underlying index futures trading in Hong Kong, hence the market-making hours for these instruments will follow the index futures trading hours on Hong Kong Stock Exchange from 9.30am to 4.30pm, with a break from 12-1pm. Specified Investment Products 
Structured Warrants and Daily Leverage Certificates are for investors who are willing to accept the risk of substantial losses up to the principal investment amount, possibly within a very short timeframe. Investors should also have sufficient understanding of the product and should possess either a high level of knowledge or sufficient trading experience to properly evaluate and assess the product structure, associated risks, valuation, costs and expected returns. All investors need to be Specified Investment Products (SIP) qualified to invest in these instruments.
</body></html>





Investors can now gain exposure to Hang Seng TECH Index (HS TECH) via new SGX-listed DLCs and Warrants. DLCs and Warrants are leverage instruments for investors seeking to capture short-term trends on the underlying index for both long and short directions. 
	 
	
Issued by Societe Generale, the 5x Long and Short DLCs on HS TECH started trading on 19 February. The DLCs offer a fixed leverage of 5x the daily performance of the underlying index i.e. a 1% move in HS TECH translates into a 5% move in the DLC on a close-to-close basis.   
	 
	Issued by Macquarie Bank, Call and Put Warrants on HS TECH started trading on 22 February. The warrants offer an effective leverage of approximately 10 times on the underlying index performance and are generally priced below $0.20 per unit. 

 

Daily Leverage Certificates (“DLCs”) and Structured warrants (“Warrants”) are financial instruments issued by a third-party financial institution, usually investment banks, and are traded in the SGX securities market. DLCs and Warrants offer investors an alternative instrument to participate in the price performance of an underlying asset at a fraction of the underlying asset price. Any failure of the issuer or guarantor to perform obligations when due (e.g. issuer becomes insolvent), may result in the loss of an entire investment.  HS TECH outperforms HSI and HSCEI with +56% return since its launch  
Since its launch on 27 July 2020, the Hang Seng TECH Index (HS TECH) has outperformed the Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) by a wide margin. As shown in the chart below, HS TECH returned +56% between 27 July 2020 and 19 February 2021 compared to HSI’s +25% and HSCEI’s +20%. Given the more concentrated portfolio in the technology sector, it is not surprising that HS TECH has outperformed the broad based market indices such as HSI and HSCEI amidst the market rally since the start of 2021.  



      
    
    Index Performance

According to the factsheet provided by Hang Seng Indexes, HS TECH includes the 30 largest technology companies listed in Hong Kong that are classified under Industrials, Consumer Discretionary, Healthcare, Financials or Information Technology industries and are considered innovative by operating a technology-enabled business, with strong Research &amp; Development investment or exhibit high revenue growth.  
The Index is free-float market capitalization weighted with 8% cap on individual constituent weighting. The top 5 constituents are Meituan-W, Sunny Optical, Tencent, BABA-SW and JD Health as of January 2021. Click here to read more.  HS TECH exhibits higher volatility than HSI and HSCEI  
The potential for higher returns comes with higher volatility on the concentrated HS TECH index compared to more broad base market indices like the HSI and HSCEI. As shown in the chart below, HS TECH exhibited a 30-Day volatility of 39% compared to HSI's 22% and HSCEI’s 22%. Volatility is a measure of the risk of price moves for the index based on the standard deviation of day-to-day logarithmic historical price changes. The 30-Day volatility is the annualized standard deviation of the relative price change for the 30 most recent trading days, expressed as a percentage.


      
    
    30 Day Volatility


Since end December 2020, the 30-Day volatility has also been rising which may be ideal for day traders or generally investors who have a short-term view of the market. The newly listed DLCs and Warrants are specifically designed to be traded on a short-term basis – offering leverage exposure for potential magnified returns (or losses), capital efficiency and flexibility to take a long or short position – therefore they are ideal instruments for investors to take full advantage of the day-to-day market swings, even if volatility starts to slow down.  Specifications of New DLCs on HS TECH   
There are two types of DLCs –  a Long DLC and a Short DLC.  Long DLCs are for investors who have a bullish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go up). Short DLCs are for investors who have a bearish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go down). A summary of the terms of the new DLCs is tabled below.




			Counter name
			
			
			Code
			
			
			Underlying index 
			
			
			Type
			
			
			Leverage 
			
			
			Issue Price (S$)
			
			
			Expiry Date
			
		


			HSTECH 5xLongSG230216
			
			
			CXDW
			
			
			Hang Seng TECH Index
			
			
			LONG
			
			
			5x
			
			
			2.50
			
			
			16 Feb 2023
			
		


			HSTECH 5xShortSG230216
			
			
			CWEW
			
			
			Hang Seng TECH Index
			
			
			SHORT
			
			
			-5x
			
			
			2.50
			
			
			16 Feb 2023
			
		

 Source: SGX

 

Investors are advised to read the issuer documents found on SGX website here or the issuer’s DLC website here for the full details of the DLCs including the product features (e.g. compounding effect and airbag mechanism) and the risks before investing in the DLCs.  Specifications of New Warrants on HS TECH  
Similarly, there are two types of Warrants – a Call Warrant and a Put Warrant. Call warrants are for investors who have a bullish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go up). Put warrants are for investors who have a bearish view of the underlying index (i.e. the investor takes the view that the price of the underlying index will go down). A summary of the terms of the new Warrants is tabled below.




			Counter name
			
			
			Code
			
			
			Underlying Index
			
			
			Type
			
			
			Exercise Level 
			
			
			Expiry Date
			
		


			HSTECH 12300 MB ECW210429
			
			
			IQTW
			
			
			Hang Seng TECH Index
			
			
			CALL
			
			
			12300
			
			
			29 Apr 21
			
		


			HSTECH 9300 MB EPW210429
			
			
			YF7W
			
			
			Hang Seng TECH Index
			
			
			PUT
			
			
			9300
			
			
			29 Apr 21
			
		


			HSTECH 14000 MB ECW210629
			
			
			ICYW
			
			
			Hang Seng TECH Index
			
			
			CALL
			
			
			14000
			
			
			29 June 21
			
		


			HSTECH 8000 MB EPW210629
			
			
			V6EW
			
			
			Hang Seng TECH Index
			
			
			PUT
			
			
			8000
			
			
			29 June 21
			
		

 Source: SGX

 

Investors are advised to read the issuer documents found on SGX website here or the issuer’s warrant website here for the full details of the warrants including the product features and the risks before investing in them.  
Investors should note these Warrants/DLCs will track the moves in the underlying index futures trading in Hong Kong, hence the market-making hours for these instruments will follow the index futures trading hours on Hong Kong Stock Exchange from 9.30am to 4.30pm, with a break from 12-1pm.  Specified Investment Products   
Structured Warrants and Daily Leverage Certificates are for investors who are willing to accept the risk of substantial losses up to the principal investment amount, possibly within a very short timeframe. Investors should also have sufficient understanding of the product and should possess either a high level of knowledge or sufficient trading experience to properly evaluate and assess the product structure, associated risks, valuation, costs and expected returns. All investors need to be Specified Investment Products (SIP) qualified to invest in these instruments.



New DLCs and Warrants tracking the Hang Seng TECH Index

China

JD Health International Inc. operates drug stores. The Company retails Chinese and Western medicines, nutrition products, health care products, and other products. JD Health International markets its products throughout China.

JD Health International (6618 HK)

New DLCs and Warrants tracking the Hang Seng TECH Index

Investors can now gain exposure to Hang Seng TECH Index (HS TECH) via new SGX-listed DLCs and Warrants. DLCs and Warrants are leverage...

Singapore Exchange Ltd (SGX)