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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SGX FX Futures volume grew 12% m-o-m to US$106 billion in May, as economies reopen after months of lockdown 

<ul>
<li>17%Aggregate volume in May at US$106 billion, down 5% y-o-y, up 12% m-o-m; number of contracts at 2 million contracts, up 8% y-o-y and up 17% m-o-m;</li>
	<li>Aggregate YTD volume at US$636 billion, up 30% y-o-y</li>
</ul>
Many countries are looking to reopen; stock market recovery a disconnect from painful economic reality

As COVID-19 infection numbers drop, many countries are now looking to gradually reopen their economies in phases with restrictions in place. The U.S. continues to remain the worst affected, with over 1.7 million cases and more than 100,000 deaths, with Brazil being the second most affected country.

Post-COVID economic recovery looks to be slow as global industrial output took a hard hit and demand remained suppressed, coupled with the time lag in government stimulus transmitting into the wider economy. GDP estimates remain weak with rising unemployment pointing to an inevitable contraction in many countries. Since late-March, more than 40 million people or one in four American workers have claimed unemployment benefits. However, key stock market indices like Dow Jones Index and S&amp;P Index have seen a V-shape recovery since the lows in March, an indication that stock indices powered by selected large-cap tech stocks may not be representative of the real economy.

U.S. and China head towards a new cold war

In May, the U.S. withdrew funding from WHO and later announced plans to exit WHO altogether. The US also stepped up efforts to blame China for the pandemic, and China on the other hand backed a WHO led investigation into Covid-19 origins. The U.S. was also looking to restrict market access for Chinese companies by introducing a bill to delist them from US exchanges if they do not follow US standards for audits and other financial regulations. The planned legislation would also require publicly traded companies to reveal whether they are owned or controlled by a foreign government.

Barring a minor spike at the start of May, the implied volatility in Asian currencies remained fairly tepid and generally drifted lower through the month. Asian emerging markets in general remain at risk of reduced foreign investments as they lag on the economic recovery cycle and money continues to plough back into Chinese assets, driven by index inclusions.

SGX FX Futures saw a modest recovery in trading and open interest in May as compared to April, when volatility was subdued. The aggregate volume for SGX FX Futures in May increased 12% month-on-month (“m-o-m”) but fell 5% year-on-year (“y-o-y”) to US$106 billion. Overall, 2 million lots of SGX FX futures contracts were traded in May (up 17% m-o-m and up 8% y-o-y). Aggregate open interest at the end of May jumped by 14% m-o-m to US$9.2 billion. 
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SGX USD/CNH Futures volume up 7% m-o-m to above US$72 billion in May, as Renminbi weakened 

<ul>
<li>SGX USD/CNH Futures volume grew 7% m-o-m to above US$72 billion in May, from a modest April;  </li>
	<li>Month-end open interest at US$7.25 billion, up 16% m-o-m; </li>
	<li>SGX’s market share in offshore Renminbi futures remain at more than 80%</li>
</ul>
China’s GDP in Q12020 dropped by 6.8% y-o-y and the targeted budget deficit has widened to more than 3.6% of GDP. In another sign of how COVID-19 has caused a deep dent in its economy, the Chinese government has also decided to break away from its practice of having a hard GDP target, which was in place for decades.   

Notwithstanding this, post-COVID 19 recovery in China is now underway. Although strict rules on community level monitoring, social distancing and testing are still in place, factories are steadily opening up.

China’s economic stimulus plan is broad-based and multi-pronged as it aims to be inclusive of the wider economy. The Chinese government has shifted the focus of its stimulus towards jobs, issued almost US$ 500 billion worth of infrastructure bonds and is likely to continue down the path of monetary easing to facilitate the recovery process. Banks and financial services firms are being encouraged to be more inclusive in lending and extending credit to smaller businesses. The Chinese government is also likely to continue implementing lower VAT and defer corporate taxes for small businesses to next year.

Beijing has so far remained committed to implementing the terms of the “phase 1” deal with the U.S., though the latter seeks to limit Chinese companies’ access to U.S. dollar markets and is wielding its influence on other nations to limit the use of Chinese technology. However, with China being an integral part of the global supply chain, most countries would continue to rely on it to recover from the crisis.

SGX USD/CNH Futures saw a modest recovery in May, following the general reduction in trading volumes across OTC markets seen in April. SGX USD/CNH Futures volume grew 7% m-o-m in May to above US$72 billion (724,127 lots), representing a global market share of around 83%. Open interest for SGX USD/CNH Futures in end-May grew 16% m-o-m to US$7.25 billion or 72,495 contracts. 
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SGX INR/USD Futures trading volume increased 27% m-o-m to US$33 billion in May, even as Rupee volatility stays low as India remain in lockdown 

<ul>
<li>SGX INR/USD Futures volume at US$33 billion in May, up 27% m-o-m; number of contracts at 1.24 million lots, up 26% m-o-m</li>
	<li>SGX maintains largest global market share in INR/USD Futures  </li>
</ul>
The Indian government has continued to tout its INR 20 trillion package towards the economic revival plan. This includes multiple support pillars towards small enterprises, the poor, migrants and agriculture. The government has also announced regulatory reforms in multiple industries such as mining, online education, digital infrastructure, defence and healthcare. The policy measures assume that banks will take up credit risk, though there has been a general lack of credit appetite among banks that are already struggling with bad loans and are in dire need of fresh capital. The government is also looking to relax labour laws to stimulate job increase, but this has given rise to fears of exploitative employment practices.

Another key pillar of the government’s response is the call for self-reliance with “vocal for local” being the catchphrase and this is underpinned by certain sections of the government that has long demanded for “Swadeshi” or homegrown goods.   

Foreign portfolio investors (FPI) withdrew US$1 billion in May. Withdrawals from local fixed income markets were close to US$4 billion, as EM debt continued to remain under pressure from weak currencies and the rising cost of stimulus. This took the total year-to-date FPI withdrawals from India in 2020 to almost US$17.5 billion. However, Rupee continued to move in a narrow range and its implied volatility dropped throughout the month.

Despite the Indian Rupee remaining range-bound in May with low volatility, SGX INR/USD Futures traded close to 1.24 million lots (up 26% m-o-m) or US$33 billion (up 27% m-o-m). The month-end open interest also jumped 13% m-o-m, with SGX maintaining the largest global market share in INR/USD Futures.
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SGX FX Futures volume grew 12% m-o-m to US$106 billion in May, as economies reopen after months of lockdown 


17%Aggregate volume in May at US$106 billion, down 5% y-o-y, up 12% m-o-m; number of contracts at 2 million contracts, up 8% y-o-y and up 17% m-o-m;
	Aggregate YTD volume at US$636 billion, up 30% y-o-y

Many countries are looking to reopen; stock market recovery a disconnect from painful economic reality

As COVID-19 infection numbers drop, many countries are now looking to gradually reopen their economies in phases with restrictions in place. The U.S. continues to remain the worst affected, with over 1.7 million cases and more than 100,000 deaths, with Brazil being the second most affected country.

Post-COVID economic recovery looks to be slow as global industrial output took a hard hit and demand remained suppressed, coupled with the time lag in government stimulus transmitting into the wider economy. GDP estimates remain weak with rising unemployment pointing to an inevitable contraction in many countries. Since late-March, more than 40 million people or one in four American workers have claimed unemployment benefits. However, key stock market indices like Dow Jones Index and S&amp;P Index have seen a V-shape recovery since the lows in March, an indication that stock indices powered by selected large-cap tech stocks may not be representative of the real economy.

U.S. and China head towards a new cold war

In May, the U.S. withdrew funding from WHO and later announced plans to exit WHO altogether. The US also stepped up efforts to blame China for the pandemic, and China on the other hand backed a WHO led investigation into Covid-19 origins. The U.S. was also looking to restrict market access for Chinese companies by introducing a bill to delist them from US exchanges if they do not follow US standards for audits and other financial regulations. The planned legislation would also require publicly traded companies to reveal whether they are owned or controlled by a foreign government.

Barring a minor spike at the start of May, the implied volatility in Asian currencies remained fairly tepid and generally drifted lower through the month. Asian emerging markets in general remain at risk of reduced foreign investments as they lag on the economic recovery cycle and money continues to plough back into Chinese assets, driven by index inclusions.

SGX FX Futures saw a modest recovery in trading and open interest in May as compared to April, when volatility was subdued. The aggregate volume for SGX FX Futures in May increased 12% month-on-month (“m-o-m”) but fell 5% year-on-year (“y-o-y”) to US$106 billion. Overall, 2 million lots of SGX FX futures contracts were traded in May (up 17% m-o-m and up 8% y-o-y). Aggregate open interest at the end of May jumped by 14% m-o-m to US$9.2 billion. 



      
    
    202006_1E


SGX USD/CNH Futures volume up 7% m-o-m to above US$72 billion in May, as Renminbi weakened 


SGX USD/CNH Futures volume grew 7% m-o-m to above US$72 billion in May, from a modest April;  
	Month-end open interest at US$7.25 billion, up 16% m-o-m; 
	SGX’s market share in offshore Renminbi futures remain at more than 80%

China’s GDP in Q12020 dropped by 6.8% y-o-y and the targeted budget deficit has widened to more than 3.6% of GDP. In another sign of how COVID-19 has caused a deep dent in its economy, the Chinese government has also decided to break away from its practice of having a hard GDP target, which was in place for decades.   

Notwithstanding this, post-COVID 19 recovery in China is now underway. Although strict rules on community level monitoring, social distancing and testing are still in place, factories are steadily opening up.

China’s economic stimulus plan is broad-based and multi-pronged as it aims to be inclusive of the wider economy. The Chinese government has shifted the focus of its stimulus towards jobs, issued almost US$ 500 billion worth of infrastructure bonds and is likely to continue down the path of monetary easing to facilitate the recovery process. Banks and financial services firms are being encouraged to be more inclusive in lending and extending credit to smaller businesses. The Chinese government is also likely to continue implementing lower VAT and defer corporate taxes for small businesses to next year.

Beijing has so far remained committed to implementing the terms of the “phase 1” deal with the U.S., though the latter seeks to limit Chinese companies’ access to U.S. dollar markets and is wielding its influence on other nations to limit the use of Chinese technology. However, with China being an integral part of the global supply chain, most countries would continue to rely on it to recover from the crisis.

SGX USD/CNH Futures saw a modest recovery in May, following the general reduction in trading volumes across OTC markets seen in April. SGX USD/CNH Futures volume grew 7% m-o-m in May to above US$72 billion (724,127 lots), representing a global market share of around 83%. Open interest for SGX USD/CNH Futures in end-May grew 16% m-o-m to US$7.25 billion or 72,495 contracts. 



      
    
    202006_2E


SGX INR/USD Futures trading volume increased 27% m-o-m to US$33 billion in May, even as Rupee volatility stays low as India remain in lockdown 


SGX INR/USD Futures volume at US$33 billion in May, up 27% m-o-m; number of contracts at 1.24 million lots, up 26% m-o-m
	SGX maintains largest global market share in INR/USD Futures  

The Indian government has continued to tout its INR 20 trillion package towards the economic revival plan. This includes multiple support pillars towards small enterprises, the poor, migrants and agriculture. The government has also announced regulatory reforms in multiple industries such as mining, online education, digital infrastructure, defence and healthcare. The policy measures assume that banks will take up credit risk, though there has been a general lack of credit appetite among banks that are already struggling with bad loans and are in dire need of fresh capital. The government is also looking to relax labour laws to stimulate job increase, but this has given rise to fears of exploitative employment practices.

Another key pillar of the government’s response is the call for self-reliance with “vocal for local” being the catchphrase and this is underpinned by certain sections of the government that has long demanded for “Swadeshi” or homegrown goods.   

Foreign portfolio investors (FPI) withdrew US$1 billion in May. Withdrawals from local fixed income markets were close to US$4 billion, as EM debt continued to remain under pressure from weak currencies and the rising cost of stimulus. This took the total year-to-date FPI withdrawals from India in 2020 to almost US$17.5 billion. However, Rupee continued to move in a narrow range and its implied volatility dropped throughout the month.

Despite the Indian Rupee remaining range-bound in May with low volatility, SGX INR/USD Futures traded close to 1.24 million lots (up 26% m-o-m) or US$33 billion (up 27% m-o-m). The month-end open interest also jumped 13% m-o-m, with SGX maintaining the largest global market share in INR/USD Futures.



      
    
    202006_3E

      
    
    202006_4E

SGX FX Futures volume grew 12% m-o-m to US$106 billion in May, as economies reopen after months of lockdown

Otc Markets Group

SGX FX Futures volume grew 12% m-o-m to US$106 billion in May, as economies reopen after months of lockdown