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

China International Capital  / Equity Bottom-Up

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<li>Aggregate SGX FX Futures volumes up 16.33% year-on-year (y-o-y) to US$123.1 billion</li>
	<li>SGX USD/CNH Futures set new month end open interest market share record of 77%</li>
	<li>SGX USD/SGD (Full-Sized) Futures recorded new monthly cumulative T-session volume of 28,309 contracts or US$2.83 billion</li>
</ul>
Transitory US inflation 

The United States (US) Consumer Price Index (CPI) rose 4.2% in April from a year earlier in its fastest pace in more than 12 years, while energy prices jumped 25% y-o-y and used car and truck prices - a key inflation indicator - surged 21%.

One of the main reasons for the big annual gain was because of base effects – inflation was very low at this time in 2020 as the Covid-19 pandemic brought the US economy to a standstill.

For that reason, the Federal Reserve (Fed) dismissed the round of numbers as transitory, with the expectation that inflation will settle down later in the year around the 2% mark.

EU puts investment pact on hold

European Union (EU) lawmakers passed a resolution to freeze ratification of an investment pact that was agreed by negotiators in December 2020, until Beijing lifts its sanctions.

The EU-China Comprehensive Agreement on Investment sought to put EU companies on equal footing in China and to establish Beijing as a trusted trading partner. However, in March 2021, Beijing imposed sanctions on 10 EU politicians, think tanks and diplomatic bodies.
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SGX USD/CNH Futures: Volumes and month-end open interest up y-o-y in May

<ul>
<li>SGX USD/CNH Futures volumes increased <a>13.4% m-o-m and 20.1% y-o-y in May to US$87 billion</a>
</li>
	<li>Month-end open interest at <a>US$9.6 billion, up 4.2% m-o-m and 32.8% y-o-y</a>
</li>
</ul>
The yuan saw strong growth in May, hitting 6.4 against the US dollar after officials from the State Administration of Foreign Exchange assured that the yuan will be kept at a reasonable and balanced level.

China International Capital Corporation or CICC reported that the yuan will remain strong in the short term, but further appreciation may be limited as domestic growth momentum is expected to slow down.

The Chinese currency could weaken if the Fed tightens its monetary policy or if the US economy rebounds sharply in the coming months.

Meanwhile, comments made by the cabinet suggest that it will use administrative price caps and supply measures to curb rising commodity prices, instead of tightening monetary policy.

During a meeting chaired by Premier Li, the cabinet pledged more domestic supply to ease prices, tougher oversight on the spot and futures market and more stringent measures for speculation and hoarding.

SGX USD/CNH Futures volumes rose 13.4% m-o-m and 20.1% y-o-y in May to US$87 billion, with month-end open interest up 4.2% m-o-m and 32.8% y-o-y to US$9.6 billion.
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SGX INR/USD Futures month-end open interest at 69,473 contracts, up 103% m-o-m

<ul>
<li>SGX INR/USD Futures volumes down 20.9% m-o-m to US$28.7 billion in May</li>
	<li>Month-end open interest at US$1.9 billion, up 107% m-o-m and 3.9% y-o-y</li>
</ul>
May was a challenging month for India as new Covid-19 infections surged in the country, prompting lockdowns. The number of active cases peaked at 3.75 million on May 10 but have since declined.

During the month, the Reserve Bank of India (RBI) approved 991.2 billion rupees of payout to the central government to ease strained public finances, an amount higher than previously budgeted. In addition, as part of the Government Securities Acquisition Program, the RBI also announced an INR350 billion debt purchase (US$4.7billion) and an INR500 billion lending support for key sectors affected by the pandemic.

India's wholesale price inflation climbed to 10.5% in the month of April as fuel and manufacturing prices surged. The country’s retail inflation, measured by the CPI, eased to 4.29% from 5.5% in March. As India entered state lockdowns to curb the spread of the virus, supply chain bottlenecks could fuel price pressure in the coming months. High global inflation and less support from base effects suggest that the current disinflation could be short-lived. RBI increased its inflation projection for the next six months to 5.2%.

Adding to its suite of Indian Rupee derivatives, SGX launched the USD/INR (USD) Option contract in May, which is the first offshore listed volatility-based product with streaming liquidity for the Indian Rupee options market.

SGX INR/USD Futures month-end interest surged 107% m-o-m, at 69,473 contracts or USD$1.9 billion.

Chart 3: Trading range starting to widen out in SGX INR/USD Futures 
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SGX KRW/USD Futures daily average volume notional up 35% m-o-m and 161% y-o-y in May 2021

Korea’s consumer sentiment index rose to 105.2, the highest since June 2018 and the fifth straight month of increase, indicating optimism of a strong recovery from the pandemic. To date, Korea has seen an export-led recovery, where exports gained 53% in May.

Rising confidence in the economy also bodes well for private consumption. Household inflation levels for the next 12 months are forecasted to be up to 2.2%, with many also expecting interest rates to increase.

In May, US$868 million or 36,469 contracts of SGX KRW/USD Futures were traded, up 17% m-o-m and 124% y-o-y. Daily average volume in May 2021 surged 35% m-o-m and 161% y-o-y to US$46 million . Month-end open interest was down 46% m-o-m but up 51% y-o-y to US$91 million or 3,840 contracts. 
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Aggregate SGX FX Futures volumes up 16.33% year-on-year (y-o-y) to US$123.1 billion
	SGX USD/CNH Futures set new month end open interest market share record of 77%
	SGX USD/SGD (Full-Sized) Futures recorded new monthly cumulative T-session volume of 28,309 contracts or US$2.83 billion

Transitory US inflation 

The United States (US) Consumer Price Index (CPI) rose 4.2% in April from a year earlier in its fastest pace in more than 12 years, while energy prices jumped 25% y-o-y and used car and truck prices - a key inflation indicator - surged 21%.

One of the main reasons for the big annual gain was because of base effects – inflation was very low at this time in 2020 as the Covid-19 pandemic brought the US economy to a standstill.

For that reason, the Federal Reserve (Fed) dismissed the round of numbers as transitory, with the expectation that inflation will settle down later in the year around the 2% mark.

EU puts investment pact on hold

European Union (EU) lawmakers passed a resolution to freeze ratification of an investment pact that was agreed by negotiators in December 2020, until Beijing lifts its sanctions.

The EU-China Comprehensive Agreement on Investment sought to put EU companies on equal footing in China and to establish Beijing as a trusted trading partner. However, in March 2021, Beijing imposed sanctions on 10 EU politicians, think tanks and diplomatic bodies.



      
    
    202106_1E


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


SGX USD/CNH Futures volumes increased 13.4% m-o-m and 20.1% y-o-y in May to US$87 billion

	Month-end open interest at US$9.6 billion, up 4.2% m-o-m and 32.8% y-o-y


The yuan saw strong growth in May, hitting 6.4 against the US dollar after officials from the State Administration of Foreign Exchange assured that the yuan will be kept at a reasonable and balanced level.

China International Capital Corporation or CICC reported that the yuan will remain strong in the short term, but further appreciation may be limited as domestic growth momentum is expected to slow down.

The Chinese currency could weaken if the Fed tightens its monetary policy or if the US economy rebounds sharply in the coming months.

Meanwhile, comments made by the cabinet suggest that it will use administrative price caps and supply measures to curb rising commodity prices, instead of tightening monetary policy.

During a meeting chaired by Premier Li, the cabinet pledged more domestic supply to ease prices, tougher oversight on the spot and futures market and more stringent measures for speculation and hoarding.

SGX USD/CNH Futures volumes rose 13.4% m-o-m and 20.1% y-o-y in May to US$87 billion, with month-end open interest up 4.2% m-o-m and 32.8% y-o-y to US$9.6 billion.



      
    
    202106_2E


SGX INR/USD Futures month-end open interest at 69,473 contracts, up 103% m-o-m


SGX INR/USD Futures volumes down 20.9% m-o-m to US$28.7 billion in May
	Month-end open interest at US$1.9 billion, up 107% m-o-m and 3.9% y-o-y

May was a challenging month for India as new Covid-19 infections surged in the country, prompting lockdowns. The number of active cases peaked at 3.75 million on May 10 but have since declined.

During the month, the Reserve Bank of India (RBI) approved 991.2 billion rupees of payout to the central government to ease strained public finances, an amount higher than previously budgeted. In addition, as part of the Government Securities Acquisition Program, the RBI also announced an INR350 billion debt purchase (US$4.7billion) and an INR500 billion lending support for key sectors affected by the pandemic.

India's wholesale price inflation climbed to 10.5% in the month of April as fuel and manufacturing prices surged. The country’s retail inflation, measured by the CPI, eased to 4.29% from 5.5% in March. As India entered state lockdowns to curb the spread of the virus, supply chain bottlenecks could fuel price pressure in the coming months. High global inflation and less support from base effects suggest that the current disinflation could be short-lived. RBI increased its inflation projection for the next six months to 5.2%.

Adding to its suite of Indian Rupee derivatives, SGX launched the USD/INR (USD) Option contract in May, which is the first offshore listed volatility-based product with streaming liquidity for the Indian Rupee options market.

SGX INR/USD Futures month-end interest surged 107% m-o-m, at 69,473 contracts or USD$1.9 billion.

Chart 3: Trading range starting to widen out in SGX INR/USD Futures 



      
    
    202106_3E


SGX KRW/USD Futures daily average volume notional up 35% m-o-m and 161% y-o-y in May 2021

Korea’s consumer sentiment index rose to 105.2, the highest since June 2018 and the fifth straight month of increase, indicating optimism of a strong recovery from the pandemic. To date, Korea has seen an export-led recovery, where exports gained 53% in May.

Rising confidence in the economy also bodes well for private consumption. Household inflation levels for the next 12 months are forecasted to be up to 2.2%, with many also expecting interest rates to increase.

In May, US$868 million or 36,469 contracts of SGX KRW/USD Futures were traded, up 17% m-o-m and 124% y-o-y. Daily average volume in May 2021 surged 35% m-o-m and 161% y-o-y to US$46 million . Month-end open interest was down 46% m-o-m but up 51% y-o-y to US$91 million or 3,840 contracts. 



      
    
    202106_4E

SGX FX Futures up 16.33% in May, setting new USD/CNH open interest market share record 

China

China International Capital Corporation Limited operates as an international investment bank. The Company provides financial services, including investment banking, capital markets, securities sales and trading, fixed income, asset management, and private equity. China International Capital also offers individual wealth management and research services.

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SGX FX Futures up 16.33% in May, setting new USD/CNH open interest market share record

Aggregate SGX FX Futures volumes up 16.33% year-on-year (y-o-y) to US$123.1 billion SGX USD/CNH Futures set new month end open interest market...

Singapore Exchange Ltd (SGX)