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.

Asia’s leading multi-asset exchange

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

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

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<ul>
<li>Aggregate open interest at US$13.4 billion (200,645 contracts) as at end-January, up 20% m-o-m</li>
	<li>Aggregate SGX FX Futures volume hit US$107.8 billion (1,908,390 contracts) in January, down 7% m-o-m</li>
	<li>Average daily traded volume rose to over 93.5k contracts, up 9% m-o-m</li>
</ul>
In January 2022, the global stock market took a plunge as investors anticipated a rate hike by the Federal Reserve, the first since 2018.. The FOMC meeting concluded on 26 Jan revealed the committee's concern over persistently elevated inflation and affirmed speculations that the Fed may start to raise interest rates in March. With the withdrawal of support for businesses and global supply chains still struggling to recover, corporate earnings have fallen short of expectations. Together with the anticipated higher rates, this has caused massive stock selloffs, with the S&amp;P 500 and Nasdaq indices posting their worst monthly performance since the beginning of the pandemic. The cryptocurrency market followed suit, with selloffs amounting to a USD$500 billion loss in market cap and Bitcoin hitting a six-month low.

On the same note, emerging market currencies have experienced a muted start to 2022, as the risk-off environment prompted many investors to channel their funds into safe-haven assets. With Russia-Ukraine tensions running hot, markets were faced with surging oil prices and now brace for a further increase. Together, these factors weighed on currencies like the Koran won and Indian rupee. Fears of an all-out war, rising inflation across emerging markets and developed economies alike, and the persistence of coronavirus outbreaks continue to dampen risk sentiment.

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

<ul>
<li>SGX USD/CNH Futures volume at US$76.4 billion in January, down 10% y-o-y</li>
	<li>Open interest as of end-January was over US$11 billion, up 12% m-o-m and 16% y-o-y</li>
</ul>
In January, the Chinese yuan continued to strengthen against the US Dollar, against the downward trend displayed by other emerging market currencies. Yuan strength was mainly attributed to China’s elevated C/A surplus, despite other economic indicators pointing to an overall contraction and slowdown of businesses. The Fed’s hawkishness and the anticipated rate hike also seemed to have minimal impact on the currency pair. Ongoing export strength and the PBOC’s monetary easing has continued to spur on yuan bulls, while some have been more sceptical about the yuan’s appreciation, in view of China’s coronavirus outbreaks and still-weak property market.

China’s trade surplus hit a record high of US$94.5b in December last year, according to statistics released in January. This was driven by a 30% jump in exports as Chinese businesses could resume business earlier than their foreign counterparts, allowing them to meet strong consumer demand for goods globally, during the pandemic. Q4 GDP growth was reported at 1.6% q-o-q and 4.0% y-o-y, higher than consensus estimates.

Meanwhile, manufacturing headline PMI fell from 50.9 in December 2021 to 49.1 in January 2022, signalling a contraction China’s economy. Economic data released in January also reflected slower increases in consumer and producer prices, with PPI easing to a 10.3% y-o-y gain in December from 12.9% in November, and CPI easing to a 1.5% y-o-y gain in December from 2.3% in the previous month.

In line with its monetary easing strategies to spur growth, the PBOC cut China’s one-year MLF rate by 10 basis points (bps) to 2.85%. This was the first rate cut since March 2020 and was prompted by the property market slump as well as persistent virus outbreaks that have affected China’s growth outlook. The seven-day reverse repo rate was also cut by 10bps to 2.1%. Subsequently, the one-year and five-year LPRs were cut by 10bps and 5bps to 3.7% and 4.6% respectively. These rate cuts serve to make borrowing more attractive and increase liquidity in the markets. Policy divergence from the Fed did not seem to quell yuan strength, even as the PBOC’s deputy governor commented that one-way bets in the exchange rate market will not be allowed.

Policy divergence between a hawkish Fed and dovish PBOC led to a period of record-low volatility. Festive holidays towards the end of January took a toll on CNH traded volumes at exchanges. As a result, SGX USD/CNH Futures volume was down 10% y-o-y in January to US$76 billion, with month-end open interest up 12% m-o-m and 16% y-o-y to over US$11 billion.

Chart 2: SGX USD/CNH Futures volume 
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SGX INR/USD Futures month-end open interest surged 269% y-o-y in January

<ul>
<li>SGX INR/USD Futures volume up 7% m-o-m in January to over US$28 billion</li>
	<li>Month-end open interest surged 94% m-o-m and <a>269% y-o-y to US$2.1 billion </a>
</li>
</ul>
The Indian economy struggled to recover in January, with high Covid cases and extended restrictions weighing on its growth outlook. India’s Central Government extended its Covid-19 guidelines to end January, then again to end February. The ban on international passenger flights started in March 2020 was also extended to end February. The impact of the pandemic on slowed economic growth continues to be seen in economic data, with India’s manufacturing headline PMI falling to 54.0 in January from 55.5 in December last year, and its services headline PMI falling to 51.5 from 55.5 over the same period.

Meanwhile, inflation is at a five-month high, with December CPI data showing a 5.6% yoy gain, up from a 4.9% yoy gain the previous month. The RBI has stuck to its “accommodative stance”, leaving interest rates unchanged while injecting liquidity into the market via reverse repo auctions. Fortunately, the number of Covid-19 cases seems to have peaked in India’s biggest cities, with falling cases observed in New Delhi and Mumbai.

India’s stock market also experienced a massive selloff in January, where technology stocks were the hardest hit. Fintech company Paytm fell 31% in January after its lacklustre IPO in November last year. Overall, Indian stock indices <a>fell 2.4%,</a> though not as much as the S&amp;P 500 which fell 7%. Still, equity outflows led to the rupee weakening against USD. Capital outflows reversed slightly at the end of January, due to the expectations of US dollar inflows from the upcoming IPO of state-run Life Insurance Corp. of India.

Geopolitical tensions, elevated crude oil prices, and a hawkish US Fed added downward pressure on the rupee. SGX INR/USD Futures volume was up 7% m-o-m in January to over US$28 billion, with month-end open interest up 94% m-o-m and 269% y-o-y at US$2.1 billion (78,150 contracts).

Chart 4: Trading range in SGX INR/USD Futures 
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SGX KRW/USD Futures volume surged 109% y-o-y in January 2022

<ul>
<li>SGX KRW/USD Futures volume surged 18% m-o-m and 109% y-o-y in January to US$1.4 billion</li>
	<li>Open interest at US$163 million as of end-January, down 11% m-o-m but up 179% y-o-y</li>
</ul>
Korea’s high inflation is no longer viewed as transitionary, and this has led to an increasingly hawkish BOK. 2021 consumer inflation soared to 2.5%, the fastest in 10 years, and is expected to remain well above 2% in 2022. As a response, the BOK raised its benchmark rate once again by 25bps to 1.25%, highest since the height of the pandemic in March 2020. Governor Lee Ju-yeol’s hawkish tone reflects his concerns over high inflation and suggests that further rate hikes in the year are entirely possible.

While overall dollar strength has weighed on the won, strong performance of the semiconductor industry due to higher consumer demand, as well as expected Dollar inflows from the upcoming IPO of Korea’s LG Energy Solution, has had positive impacts on investor confidence.

In January, US$1.4 billion (63,728 contracts) of SGX KRW/USD Futures were traded, up 18% m-o-m and 109% y-o-y. Daily average volume was at US$71.4 million, up 36% m-o-m. Month-end open interest was at US$163 million (7,740 contracts), down 11% m-o-m but up 179% y-o-y.
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Aggregate open interest at US$13.4 billion (200,645 contracts) as at end-January, up 20% m-o-m
	Aggregate SGX FX Futures volume hit US$107.8 billion (1,908,390 contracts) in January, down 7% m-o-m
	Average daily traded volume rose to over 93.5k contracts, up 9% m-o-m

In January 2022, the global stock market took a plunge as investors anticipated a rate hike by the Federal Reserve, the first since 2018.. The FOMC meeting concluded on 26 Jan revealed the committee's concern over persistently elevated inflation and affirmed speculations that the Fed may start to raise interest rates in March. With the withdrawal of support for businesses and global supply chains still struggling to recover, corporate earnings have fallen short of expectations. Together with the anticipated higher rates, this has caused massive stock selloffs, with the S&amp;P 500 and Nasdaq indices posting their worst monthly performance since the beginning of the pandemic. The cryptocurrency market followed suit, with selloffs amounting to a USD$500 billion loss in market cap and Bitcoin hitting a six-month low.

On the same note, emerging market currencies have experienced a muted start to 2022, as the risk-off environment prompted many investors to channel their funds into safe-haven assets. With Russia-Ukraine tensions running hot, markets were faced with surging oil prices and now brace for a further increase. Together, these factors weighed on currencies like the Koran won and Indian rupee. Fears of an all-out war, rising inflation across emerging markets and developed economies alike, and the persistence of coronavirus outbreaks continue to dampen risk sentiment.

Chart 1: SGX FX Futures Trading Volume



      
    
    202202_1E


SGX USD/CNH Futures month-end open interest up m-o-m and y-o-y in January


SGX USD/CNH Futures volume at US$76.4 billion in January, down 10% y-o-y
	Open interest as of end-January was over US$11 billion, up 12% m-o-m and 16% y-o-y

In January, the Chinese yuan continued to strengthen against the US Dollar, against the downward trend displayed by other emerging market currencies. Yuan strength was mainly attributed to China’s elevated C/A surplus, despite other economic indicators pointing to an overall contraction and slowdown of businesses. The Fed’s hawkishness and the anticipated rate hike also seemed to have minimal impact on the currency pair. Ongoing export strength and the PBOC’s monetary easing has continued to spur on yuan bulls, while some have been more sceptical about the yuan’s appreciation, in view of China’s coronavirus outbreaks and still-weak property market.

China’s trade surplus hit a record high of US$94.5b in December last year, according to statistics released in January. This was driven by a 30% jump in exports as Chinese businesses could resume business earlier than their foreign counterparts, allowing them to meet strong consumer demand for goods globally, during the pandemic. Q4 GDP growth was reported at 1.6% q-o-q and 4.0% y-o-y, higher than consensus estimates.

Meanwhile, manufacturing headline PMI fell from 50.9 in December 2021 to 49.1 in January 2022, signalling a contraction China’s economy. Economic data released in January also reflected slower increases in consumer and producer prices, with PPI easing to a 10.3% y-o-y gain in December from 12.9% in November, and CPI easing to a 1.5% y-o-y gain in December from 2.3% in the previous month.

In line with its monetary easing strategies to spur growth, the PBOC cut China’s one-year MLF rate by 10 basis points (bps) to 2.85%. This was the first rate cut since March 2020 and was prompted by the property market slump as well as persistent virus outbreaks that have affected China’s growth outlook. The seven-day reverse repo rate was also cut by 10bps to 2.1%. Subsequently, the one-year and five-year LPRs were cut by 10bps and 5bps to 3.7% and 4.6% respectively. These rate cuts serve to make borrowing more attractive and increase liquidity in the markets. Policy divergence from the Fed did not seem to quell yuan strength, even as the PBOC’s deputy governor commented that one-way bets in the exchange rate market will not be allowed.

Policy divergence between a hawkish Fed and dovish PBOC led to a period of record-low volatility. Festive holidays towards the end of January took a toll on CNH traded volumes at exchanges. As a result, SGX USD/CNH Futures volume was down 10% y-o-y in January to US$76 billion, with month-end open interest up 12% m-o-m and 16% y-o-y to over US$11 billion.

Chart 2: SGX USD/CNH Futures volume 



      
    
    202202_2E

      
    
    202202_3E


SGX INR/USD Futures month-end open interest surged 269% y-o-y in January


SGX INR/USD Futures volume up 7% m-o-m in January to over US$28 billion
	Month-end open interest surged 94% m-o-m and 269% y-o-y to US$2.1 billion 


The Indian economy struggled to recover in January, with high Covid cases and extended restrictions weighing on its growth outlook. India’s Central Government extended its Covid-19 guidelines to end January, then again to end February. The ban on international passenger flights started in March 2020 was also extended to end February. The impact of the pandemic on slowed economic growth continues to be seen in economic data, with India’s manufacturing headline PMI falling to 54.0 in January from 55.5 in December last year, and its services headline PMI falling to 51.5 from 55.5 over the same period.

Meanwhile, inflation is at a five-month high, with December CPI data showing a 5.6% yoy gain, up from a 4.9% yoy gain the previous month. The RBI has stuck to its “accommodative stance”, leaving interest rates unchanged while injecting liquidity into the market via reverse repo auctions. Fortunately, the number of Covid-19 cases seems to have peaked in India’s biggest cities, with falling cases observed in New Delhi and Mumbai.

India’s stock market also experienced a massive selloff in January, where technology stocks were the hardest hit. Fintech company Paytm fell 31% in January after its lacklustre IPO in November last year. Overall, Indian stock indices fell 2.4%, though not as much as the S&amp;P 500 which fell 7%. Still, equity outflows led to the rupee weakening against USD. Capital outflows reversed slightly at the end of January, due to the expectations of US dollar inflows from the upcoming IPO of state-run Life Insurance Corp. of India.

Geopolitical tensions, elevated crude oil prices, and a hawkish US Fed added downward pressure on the rupee. SGX INR/USD Futures volume was up 7% m-o-m in January to over US$28 billion, with month-end open interest up 94% m-o-m and 269% y-o-y at US$2.1 billion (78,150 contracts).

Chart 4: Trading range in SGX INR/USD Futures 



      
    
    202202_4E


SGX KRW/USD Futures volume surged 109% y-o-y in January 2022


SGX KRW/USD Futures volume surged 18% m-o-m and 109% y-o-y in January to US$1.4 billion
	Open interest at US$163 million as of end-January, down 11% m-o-m but up 179% y-o-y

Korea’s high inflation is no longer viewed as transitionary, and this has led to an increasingly hawkish BOK. 2021 consumer inflation soared to 2.5%, the fastest in 10 years, and is expected to remain well above 2% in 2022. As a response, the BOK raised its benchmark rate once again by 25bps to 1.25%, highest since the height of the pandemic in March 2020. Governor Lee Ju-yeol’s hawkish tone reflects his concerns over high inflation and suggests that further rate hikes in the year are entirely possible.

While overall dollar strength has weighed on the won, strong performance of the semiconductor industry due to higher consumer demand, as well as expected Dollar inflows from the upcoming IPO of Korea’s LG Energy Solution, has had positive impacts on investor confidence.

In January, US$1.4 billion (63,728 contracts) of SGX KRW/USD Futures were traded, up 18% m-o-m and 109% y-o-y. Daily average volume was at US$71.4 million, up 36% m-o-m. Month-end open interest was at US$163 million (7,740 contracts), down 11% m-o-m but up 179% y-o-y.



      
    
    202202_5E

SGX FX Futures aggregate volume surged past US$107 billion in January

LG Chem Ltd

SGX FX Futures aggregate volume surged past US$107 billion in January