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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<h3 class="text-h3"><strong>SGX FX Futures in robust start to 2020, with January trading volume up 25%</strong></h3>

<ul>
<li><em>Aggregate volume in January at 2.34 million contracts, up 25% y-o-y</em></li>
	<li><em>In dollar terms, up 20% y-o-y at US$126 billion</em></li>
</ul>
<p><strong>While first phase of U.S.-China trade deal provides relief, developments over novel coronavirus damp sentiment</strong>: For financial markets, the trade war dominated the 2019 news cycle and January saw the signing of what has been billed as the first phase of a deal. To be sure, as long as there remained a lack of details for a longer-term resolution, any relief was always going to be short-lived. The development was followed by the threat from a new coronavirus, which jolted markets and drove demand for protective gear such as facemasks, pushing up stock prices of healthcare-product manufacturers. Among them, the Japanese company Kawamoto (ID - 3604, Tokyo) saw its share price jump nearly five times over the second half of January. By February, what has evolved into a global health emergency has started to make an impact on supply chains.</p>

<p class="MsoNoSpacing"><strong>Brexit – the UK exits the EU after 47 years: </strong>Britain exited the European Union on 1 February, providing some closure more than 3.5 years after a referendum was held in June 2016. Throughout January, the UK media reported more headlines about the British royal family than Brexit, which was probably a welcome distraction since details of any post-Brexit deal with the EU remain sketchy. In London, the central bank made no changes to interest rates, providing the British pound a temporary fillip towards the end of January. Brexit is finally done, yet the next phase remains unknown. While Britain has cut nearly 20 trade deals and rolled them over to post-Brexit UK, those are all with smaller countries. The chances of any swift trade agreement before the year-end with the EU, its largest trade partner, remained bleak.</p>

<p><strong>Public protests continue in India: </strong>Anti-CAA (Citizenship Amendment Act) protests moved past symbolic gestures and gained momentum across India, with students leading rallies in several cities. The movement has split opinion across the country and while the government has yet to engage with the protesters, members of the ruling Bharatiya Janata Party have routinely labelled them as anti-nationalist, stoking the fires of discontent. In light of upcoming state elections in Delhi, the election commission issued notices to several BJP members for breaching the model code of conduct. With this issue hogging the headlines, economic issues took a backseat for India for most of the month.</p>

<p class="MsoNoSpacing">Global equity markets were largely flat in January, with the VIX rising sharply mid-month in response to anxieties related to the new coronavirus and offsetting any gains. While implied volatility was generally low for the British pound and the euro, probably given the certainty of Brexit, volatility increased for the Australian dollar and the yen. These drivers kept currency markets occupied in January and the 2020 started strongly for SGX, Asia’s largest FX futures marketplace. <strong>Aggregate volume for SGX FX futures was 2.4 million contracts (up 25% y-o-y). In dollar terms, this was US$126 billion (up 20% y-o-y).</strong></p>
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      <img src='https://api2.sgx.com/sites/default/files/2020-02/Chart1_140220.PNG' alt='SGX FX Futures Growth' />
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    <div class='content-caption'>SGX FX Futures Growth</div>
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<h3 class="text-h3"><strong>SGX USD/CNH Futures volume in January at US$84.3 billion; U.S.-China first phase trade deal and new coronavirus drive trading despite Lunar New Year holidays</strong></h3>

<ul>
<li><em>SGX USD/CNH Futures trading volume at US$84.3 billion, up 15% y-o-y </em></li>
	<li><em>Month-end open interest at US$6.3 billion, up 18% m-o-m </em></li>
</ul>
<p class="MsoNoSpacing">Global markets heaved a sigh of relief early in January after the U.S. and China signed what was billed as the first phase of a trade deal. The trade war had been the top macro driver in 2019 and the agreement should put to rest, albeit temporarily, concerns of an escalation. While market participants are still seeking to interpret the details to gauge for impact, the consensus appeared to be that there is no second phase in sight.</p>

<p class="MsoNoSpacing">With onshore markets closed for Lunar New Year festivities towards the end of January, the trade deal could have been the only big story in January. However, the World Health Organization (WHO) issued an alert for an outbreak of pneumonia in the city of Wuhan in China’s central Hubei province caused by a mysterious coronavirus. By February, there was a sense of a global health emergency as the death toll from China and beyond exceeded that of previous pandemics such as SARS some 17 years earlier.</p>

<p class="MsoNoSpacing">Public holidays in China provided financial markets with some cover from the fallout of the coronavirus, with no onshore trading activity. Upon markets reopening, indices in Hong Kong suffered a sharp drop. With the People’s Bank of China also closed, currency markets too were relatively quiet in the absence of any guidance from onshore. The renminbi had strengthened early in the month following the trade deal but by the last week of January, volatility in the offshore CNH markets saw a sharp spike, pushing the renminbi towards 7.</p>
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<figure>
      <img src='https://api2.sgx.com/sites/default/files/2020-02/Chart2_140220.PNG' alt='SGX CNH Futures Growth' />
    </figure>
    <div class='content-caption'>SGX CNH Futures Growth</div>
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<p class="MsoNoSpacing"><strong>The average daily volume of SGX USD/CNH Futures in January rose to US$4.21 billion</strong> as trading remained robust and exceeded US$2 billion on all days during the month, despite public holidays and lack of guidance from onshore markets. Trading volume on SGX remained above 80% of the global total in January, as <strong>participants traded US$84.3 billion (84,271 contracts) during the month</strong>. This represented a strong 15% increase y-o-y. With recent developments potentially adding to the negative sentiment around the renminbi, open interest has grown as market participants looked to manage associated risk. <strong>Open interest in SGX USD/CNH Futures grew 20% m-o-m and ended January at US$6.4 billion (64,023 contracts). This represented nearly 71% of the open interest across all exchanges with similar offerings.</strong></p>

<h3 class="text-h3"><strong>SGX INR/USD futures at US$41 billion in January; stagflation worries and civil protests sour sentiment</strong></h3>

<ul>
<li><em>Rupee weakens in January; FPI flows flat </em></li>
	<li><em>SGX INR/USD Futures trading volume at US$41 billion in January, up 29% y-o-y</em></li>
</ul>
<p class="MsoNoSpacing">India’s economic woes have been in the public domain for some time. The slowdown could be a drag on weakening global growth. Gita Gopinath, chief economist at the International Monetary Fund (IMF), had recently alluded to the wider impact of the Indian slowdown on the <a href="https://www.indiatoday.in/business/davos-2020/story/exclusive-india-responsible-for-80-of-slashed-global-growth-estimate-imf-chief-economist-gita-gopinath-1638621-2020-01-20">global economy</a>. She had also highlighted the persistent weakness in the credit markets and lacklustre business sentiment as key issues. While she also expected things to improve soon, stress in in the financial sector remained a well-recognised concern that needs proper management.</p>

<p class="MsoNoSpacing">Solving India’s economic issues would require undivided attention from the government. However, recent civil protests across the country have proven to be a distraction and there are no concrete steps announced so far. Given the controversy surrounding the CAA, economics may not get the required attention in the upcoming budget.</p>

<p class="MsoNoSpacing">The local impact of a slowdown in form of low GDP growth and a drop in demand becomes even more severe with an increase in inflation and a rise in unemployment – a confluence of conditions economists refer to as stagflation. Under these circumstances, there are concerns that any protracted slowdown will have a deeper impact in the absence of a proper policy response.</p>

<p class="MsoNoSpacing">India’s finance ministry may be running out of tools available to solve this problem since it needs to fix its own balance sheet. With government revenue lower than expected, it is unlikely to meet its fiscal deficit targets. Although the Reserve Bank of India is likely to provide heftier than usual dividend to the government from its reserves, it cannot suffice for the revenue shortfall. Efforts to raise funds by selling government stakes in public companies have also not been on track. Air India is a prime example where multiple efforts to offload government stake to raise funds have yet to produce the desired results. Moreover, several members of the ruling alliance have opposed any such effort to sell “national jewels” and criticised such efforts.</p>
</body></html>

<figure>
      <img src='https://api2.sgx.com/sites/default/files/2020-02/Chart3_140220.PNG' alt='SGX INR Futures Growth' />
    </figure>
    <div class='content-caption'>SGX INR Futures Growth</div>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN" "http://www.w3.org/TR/REC-html40/loose.dtd">
<html><body><p>The recent negative headlines in both national and international publications have contributed to a decline in investor sentiment on India. The rupee too weakened by about 30 paisa in January. After strong net inflow from foreign portfolio investors in 2019, the flow of money from FPIs remained flat in January. The net flow was drifting in negative territory in the first half of the month before changing direction mid-month, ending January as marginally positive (US$146 million). <strong>SGX INR/USD Futures trading rose 30% y-o-y in January with volume exceeding 1.4 million contracts. In dollar terms, the trading volume translated to US$41 billion (up 29% y-o-y). The average daily volume jumped to US$1.86 billion in January, up from US$1.63 in the full year of 2019.</strong></p></body></html>

<figure>
      <img src='https://api2.sgx.com/sites/default/files/2020-02/Image4_140220.PNG' alt='SGX FlexC access' />
    </figure>
    <div class='content-caption'>SGX_FlexC_Award</div>



SGX FX Futures in robust start to 2020, with January trading volume up 25%


Aggregate volume in January at 2.34 million contracts, up 25% y-o-y
	In dollar terms, up 20% y-o-y at US$126 billion

While first phase of U.S.-China trade deal provides relief, developments over novel coronavirus damp sentiment: For financial markets, the trade war dominated the 2019 news cycle and January saw the signing of what has been billed as the first phase of a deal. To be sure, as long as there remained a lack of details for a longer-term resolution, any relief was always going to be short-lived. The development was followed by the threat from a new coronavirus, which jolted markets and drove demand for protective gear such as facemasks, pushing up stock prices of healthcare-product manufacturers. Among them, the Japanese company Kawamoto (ID - 3604, Tokyo) saw its share price jump nearly five times over the second half of January. By February, what has evolved into a global health emergency has started to make an impact on supply chains.

Brexit – the UK exits the EU after 47 years: Britain exited the European Union on 1 February, providing some closure more than 3.5 years after a referendum was held in June 2016. Throughout January, the UK media reported more headlines about the British royal family than Brexit, which was probably a welcome distraction since details of any post-Brexit deal with the EU remain sketchy. In London, the central bank made no changes to interest rates, providing the British pound a temporary fillip towards the end of January. Brexit is finally done, yet the next phase remains unknown. While Britain has cut nearly 20 trade deals and rolled them over to post-Brexit UK, those are all with smaller countries. The chances of any swift trade agreement before the year-end with the EU, its largest trade partner, remained bleak.

Public protests continue in India: Anti-CAA (Citizenship Amendment Act) protests moved past symbolic gestures and gained momentum across India, with students leading rallies in several cities. The movement has split opinion across the country and while the government has yet to engage with the protesters, members of the ruling Bharatiya Janata Party have routinely labelled them as anti-nationalist, stoking the fires of discontent. In light of upcoming state elections in Delhi, the election commission issued notices to several BJP members for breaching the model code of conduct. With this issue hogging the headlines, economic issues took a backseat for India for most of the month.

Global equity markets were largely flat in January, with the VIX rising sharply mid-month in response to anxieties related to the new coronavirus and offsetting any gains. While implied volatility was generally low for the British pound and the euro, probably given the certainty of Brexit, volatility increased for the Australian dollar and the yen. These drivers kept currency markets occupied in January and the 2020 started strongly for SGX, Asia’s largest FX futures marketplace. Aggregate volume for SGX FX futures was 2.4 million contracts (up 25% y-o-y). In dollar terms, this was US$126 billion (up 20% y-o-y).



      
    
    SGX FX Futures Growth


SGX USD/CNH Futures volume in January at US$84.3 billion; U.S.-China first phase trade deal and new coronavirus drive trading despite Lunar New Year holidays


SGX USD/CNH Futures trading volume at US$84.3 billion, up 15% y-o-y 
	Month-end open interest at US$6.3 billion, up 18% m-o-m 

Global markets heaved a sigh of relief early in January after the U.S. and China signed what was billed as the first phase of a trade deal. The trade war had been the top macro driver in 2019 and the agreement should put to rest, albeit temporarily, concerns of an escalation. While market participants are still seeking to interpret the details to gauge for impact, the consensus appeared to be that there is no second phase in sight.

With onshore markets closed for Lunar New Year festivities towards the end of January, the trade deal could have been the only big story in January. However, the World Health Organization (WHO) issued an alert for an outbreak of pneumonia in the city of Wuhan in China’s central Hubei province caused by a mysterious coronavirus. By February, there was a sense of a global health emergency as the death toll from China and beyond exceeded that of previous pandemics such as SARS some 17 years earlier.

Public holidays in China provided financial markets with some cover from the fallout of the coronavirus, with no onshore trading activity. Upon markets reopening, indices in Hong Kong suffered a sharp drop. With the People’s Bank of China also closed, currency markets too were relatively quiet in the absence of any guidance from onshore. The renminbi had strengthened early in the month following the trade deal but by the last week of January, volatility in the offshore CNH markets saw a sharp spike, pushing the renminbi towards 7.



      
    
    SGX CNH Futures Growth


The average daily volume of SGX USD/CNH Futures in January rose to US$4.21 billion as trading remained robust and exceeded US$2 billion on all days during the month, despite public holidays and lack of guidance from onshore markets. Trading volume on SGX remained above 80% of the global total in January, as participants traded US$84.3 billion (84,271 contracts) during the month. This represented a strong 15% increase y-o-y. With recent developments potentially adding to the negative sentiment around the renminbi, open interest has grown as market participants looked to manage associated risk. Open interest in SGX USD/CNH Futures grew 20% m-o-m and ended January at US$6.4 billion (64,023 contracts). This represented nearly 71% of the open interest across all exchanges with similar offerings.

SGX INR/USD futures at US$41 billion in January; stagflation worries and civil protests sour sentiment


Rupee weakens in January; FPI flows flat 
	SGX INR/USD Futures trading volume at US$41 billion in January, up 29% y-o-y

India’s economic woes have been in the public domain for some time. The slowdown could be a drag on weakening global growth. Gita Gopinath, chief economist at the International Monetary Fund (IMF), had recently alluded to the wider impact of the Indian slowdown on the global economy. She had also highlighted the persistent weakness in the credit markets and lacklustre business sentiment as key issues. While she also expected things to improve soon, stress in in the financial sector remained a well-recognised concern that needs proper management.

Solving India’s economic issues would require undivided attention from the government. However, recent civil protests across the country have proven to be a distraction and there are no concrete steps announced so far. Given the controversy surrounding the CAA, economics may not get the required attention in the upcoming budget.

The local impact of a slowdown in form of low GDP growth and a drop in demand becomes even more severe with an increase in inflation and a rise in unemployment – a confluence of conditions economists refer to as stagflation. Under these circumstances, there are concerns that any protracted slowdown will have a deeper impact in the absence of a proper policy response.

India’s finance ministry may be running out of tools available to solve this problem since it needs to fix its own balance sheet. With government revenue lower than expected, it is unlikely to meet its fiscal deficit targets. Although the Reserve Bank of India is likely to provide heftier than usual dividend to the government from its reserves, it cannot suffice for the revenue shortfall. Efforts to raise funds by selling government stakes in public companies have also not been on track. Air India is a prime example where multiple efforts to offload government stake to raise funds have yet to produce the desired results. Moreover, several members of the ruling alliance have opposed any such effort to sell “national jewels” and criticised such efforts.



      
    
    SGX INR Futures Growth

The recent negative headlines in both national and international publications have contributed to a decline in investor sentiment on India. The rupee too weakened by about 30 paisa in January. After strong net inflow from foreign portfolio investors in 2019, the flow of money from FPIs remained flat in January. The net flow was drifting in negative territory in the first half of the month before changing direction mid-month, ending January as marginally positive (US$146 million). SGX INR/USD Futures trading rose 30% y-o-y in January with volume exceeding 1.4 million contracts. In dollar terms, the trading volume translated to US$41 billion (up 29% y-o-y). The average daily volume jumped to US$1.86 billion in January, up from US$1.63 in the full year of 2019.


      
    
    SGX_FlexC_Award

SGX FX Futures in robust start to 2020, with January trading volume up 25%