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>
Five of ASEAN’s 20 largest capitalised stocks, DBS, Singtel, UOB, OCBC and Wilmar are now tradable through futures contracts. The Single Stock Futures (SSFs) suite include another five industrial and consumer stocks that rank amongst ASEAN’s largest 200 stocks. 
	 </li>
	<li>
These 10 stocks can see significant variance in net institutional inflows and outflows, varying from net flows of -S$1.1 Billion for DBS to +S$80 million for Wilmar in the 2020 YTD. SSFs provide institutions more exactitude in managing these single stock exposures. 
	 </li>
	<li>Standardised contract multipliers vary from 500 shares for DBS to 10,000 shares for Thai Bev and Yangzijiang. With underlying stock prices varying from near S$20 to S$1.00, the individual multipliers and notional values are designed to make all 10 SSFs highly accessible.   </li>
</ul>
 

Today 10 Single Stock Futures (“SSFs”) have launched on Singapore Exchange, seeing 2,692 contracts traded, with most activity observed on SSFs that are based on Oversea-Chinese Banking Corp (“OCBC”), DBS Group Holdings (“DBS”) and Keppel Corporation. 
The 10 underlying stocks of the SSFs accounted for a combined market value of S$256 billion, and averaged daily turnover of S$590 million in the 2020 year to 10 June. This means the 10 underlying stocks are amongst the most traded companies to be listed on Singapore Exchange, as they make up approximately 30% of the combined market value of stocks in Singapore, and contributed 37% of the total Singapore stock market turnover in the 2020 year to 10 June.    10 Stocks with a History of Big Moves and Mixed Returns   
The 10 companies have maintained different performance histories over the 10 year period through to 10 June, with annualised returns ranging from 14.1% from Thai Beverage PCL to -1.5% for Wilmar International. During the 10 year period through to 10 June, Bloomberg data indicates the maximum drawdown was 47% for Thai Beverage PCL and 60% for Wilmar International, while Thai Beverage PCL maintain higher annualised volatility at 31%, than Wilmar International’s 23%.
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<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-06/Capture_10.PNG' alt='Annualised Total Return' />
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 <div class='content-caption'>Annualised Total Return</div>
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SSFs enable investors to hedge exposures in these companies amidst such drawdowns and onsets of above average volatility. The SSFs also provide an efficient means to focus risk-to-reward on the performance differences between two companies. For instance, a pairs trade on Thai Beverage PCL and Wilmar International can be used to mitigate some of the systematic risks and focus exposure to unsystematic risks of the two key Consumer Good stocks. 
The recent performances of the relevant 10 stocks are tabled below and sort by market capitalisation. 
 

<table class="table table-striped"><tbody>
<tr>
<td>
			Stocks
			</td>
			<td>
			Code
			</td>
			<td>
			ASEAN Market Cap  Rank 

			#
			</td>
			<td>
			Mkt Cap $B
			</td>
			<td>
			Total Return %

			2019
			</td>
			<td>
			Net Inst. Flow S$M 2019
			</td>
			<td>
			Total Return %

			31 Dec 19 - 23 Mar
			</td>
			<td>
			Net Inst. Flow S$M 

			31 Dec 19 - 23 Mar
			</td>
			<td>
			Total Return

			%

			23 Mar - 10 Jun
			</td>
			<td>
			Net Inst. Flow S$M 23 Mar - 10 Jun
			</td>
			<td>
			10 Year Total Return %
			</td>
		</tr>
<tr>
<td>
			DBS
			</td>
			<td>
			D05
			</td>
			<td>
			2
			</td>
			<td>
			59
			</td>
			<td>
			16
			</td>
			<td>
			-477
			</td>
			<td>
			-35
			</td>
			<td>
			-1017
			</td>
			<td>
			41
			</td>
			<td>
			-67
			</td>
			<td>
			157
			</td>
		</tr>
<tr>
<td>
			Singtel
			</td>
			<td>
			Z74
			</td>
			<td>
			5
			</td>
			<td>
			43
			</td>
			<td>
			21
			</td>
			<td>
			363
			</td>
			<td>
			-32
			</td>
			<td>
			-166
			</td>
			<td>
			16
			</td>
			<td>
			-352
			</td>
			<td>
			50
			</td>
		</tr>
<tr>
<td>
			OCBC Bank
			</td>
			<td>
			O39
			</td>
			<td>
			6
			</td>
			<td>
			43
			</td>
			<td>
			2
			</td>
			<td>
			-553
			</td>
			<td>
			-29
			</td>
			<td>
			-256
			</td>
			<td>
			29
			</td>
			<td>
			-315
			</td>
			<td>
			74
			</td>
		</tr>
<tr>
<td>
			UOB
			</td>
			<td>
			U11
			</td>
			<td>
			8
			</td>
			<td>
			39
			</td>
			<td>
			13
			</td>
			<td>
			-401
			</td>
			<td>
			-33
			</td>
			<td>
			-457
			</td>
			<td>
			31
			</td>
			<td>
			-480
			</td>
			<td>
			74
			</td>
		</tr>
<tr>
<td>
			Wilmar Intl
			</td>
			<td>
			F34
			</td>
			<td>
			18
			</td>
			<td>
			26
			</td>
			<td>
			36
			</td>
			<td>
			141
			</td>
			<td>
			-30
			</td>
			<td>
			51
			</td>
			<td>
			39
			</td>
			<td>
			31
			</td>
			<td>
			-14
			</td>
		</tr>
<tr>
<td>
			ThaiBev
			</td>
			<td>
			Y92
			</td>
			<td>
			27
			</td>
			<td>
			18
			</td>
			<td>
			49
			</td>
			<td>
			141
			</td>
			<td>
			-43
			</td>
			<td>
			-60
			</td>
			<td>
			47
			</td>
			<td>
			-15
			</td>
			<td>
			276
			</td>
		</tr>
<tr>
<td>
			Keppel Corp
			</td>
			<td>
			BN4
			</td>
			<td>
			54
			</td>
			<td>
			11
			</td>
			<td>
			19
			</td>
			<td>
			-170
			</td>
			<td>
			-26
			</td>
			<td>
			-14
			</td>
			<td>
			26
			</td>
			<td>
			38
			</td>
			<td>
			27
			</td>
		</tr>
<tr>
<td>
			Genting Sing
			</td>
			<td>
			G13
			</td>
			<td>
			70
			</td>
			<td>
			10
			</td>
			<td>
			-2
			</td>
			<td>
			-240
			</td>
			<td>
			-43
			</td>
			<td>
			-12
			</td>
			<td>
			56
			</td>
			<td>
			77
			</td>
			<td>
			-8
			</td>
		</tr>
<tr>
<td>
			YZJ Shipbldg
			</td>
			<td>
			BS6
			</td>
			<td>
			165
			</td>
			<td>
			4
			</td>
			<td>
			-7
			</td>
			<td>
			6
			</td>
			<td>
			-30
			</td>
			<td>
			-77
			</td>
			<td>
			35
			</td>
			<td>
			17
			</td>
			<td>
			23
			</td>
		</tr>
<tr>
<td>
			ComfortDelGro
			</td>
			<td>
			C52
			</td>
			<td>
			179
			</td>
			<td>
			4
			</td>
			<td>
			15
			</td>
			<td>
			24
			</td>
			<td>
			-42
			</td>
			<td>
			-143
			</td>
			<td>
			22
			</td>
			<td>
			-136
			</td>
			<td>
			72
			</td>
		</tr>
<tr>
<td>
			Max 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			49
			</td>
			<td>
			363
			</td>
			<td>
			-26
			</td>
			<td>
			51
			</td>
			<td>
			56
			</td>
			<td>
			77
			</td>
			<td>
			276
			</td>
		</tr>
<tr>
<td>
			Min
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			-7
			</td>
			<td>
			-553
			</td>
			<td>
			-43
			</td>
			<td>
			-1017
			</td>
			<td>
			16
			</td>
			<td>
			-480
			</td>
			<td>
			-14
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			16
			</td>
			<td>
			 
			</td>
			<td>
			-34
			</td>
			<td>
			 
			</td>
			<td>
			34
			</td>
			<td>
			 
			</td>
			<td>
			73
			</td>
		</tr>
</tbody></table>
 Source: SGX StockFacts, Bloomberg, Refinitiv (Data as of 10 June 2020) A New Means to Enhance SG Portfolio Management 
Over the past 18 months, institutional investors have maintained different net exposures in the 10 stocks, in some instances these exposures were poles apart, as observed in the first 13 weeks of 2020, with Wilmar International recipient of S$51 million net buying by institutions and recipient of S$1.02 billion in net institutional selling. However, indiscriminate selling into the major market low on 23 March meant there was little differentiation across the 10 stocks in their price performances for the relevant period.    
The contrasts in stock exposures and performances can be better exemplified in 2019 and in the 2020 year from 23 March through to 10 June:

<ul>
<li>
SSFs on Singapore Telecommunications (“Singtel”) and Oversea-Chinese Banking Corp (“OCBC”) could have provided a hedging edge to some institutions going into 2020. In 2019, Institutions were net buyers of Singtel with a net buy amount of S$363 and net sellers of OCBC with a net sell amount of S$553 million. There was also a significant performance differential between the two heavyweight stocks that year of 19 percentage points, with Singtel generating a 21% total return and OCBC generating a total return of 2%. For examples sake, Institutions maintaining a portfolio that had three times as much exposure to Singtel as OCBC going into 2020, could have used the SSFs to better match their underlying position than an Index derivative with similar exposure to both stocks. 
	 </li>
	<li>
The impact on the portfolio of Genting Singapore’s recent outpacing of United Overseas Bank (“UOB”) could also make a case for SSF over Index Derivatives. Between 23 March and 10 June, UOB saw S$480 million in net selling from institutions, while Genting Singapore saw net buying of S$77 million. This coincided with Genting Singapore generating a 56% total return, outpacing the returns of UOB over the period which were 31%. Hence, assuming the institutional investor has not rebalanced the portfolio in the interim, the portfolio position in Genting Singapore would have grown to be relatively larger than UOB. Hence SSF’s in this instance would allow institutional investors to construct a more precise hedge closer to their actual weightings than the given Index derivative weightings.    
</li>
</ul>
 
 With underlying stock prices varying from near S$20 to S$1.00, the individual multipliers and notional values are designed to make all 10 SSFs highly accessible. Standardised contract multipliers currently vary from 500 shares for SSFs on DBS to 10,000 shares for SSFS on Thai Beverage PCL and Yangzijiang Shipbuilding. This means, for example sake:

<ul>
<li>The minimum transaction size for taking a long or short position in the June 2020 contract of the DBS SSF (“YDBS”) at prevailing price of S$21.000, the notional value of the position would be 500 shares x S$21.000 = S$10,500. If the YDBS price moves from S$21.000 to S$21.005, the change in the notional value of one contract would be S$2.50 to S$10.502.50. Note the last trading day of the June 2020 YDBS contract is 29 June, the second last business day of the expiring contract month. 
	 </li>
	<li>The minimum transaction size for taking a long or short position in June 2020 contract of the Thai Beverage PCL SSF (“YTBE”) at the prevailing price of S$0.680 would be 10,000 shares x S$0.680 = S$6,800. If the YTBE price moves from S$0.680 to S$0.679, the change in the notional value of one contract would be S$10 to S$6,790. Note the last trading day of the June 2020 YTBE contract is 29 June, the second last business day of the expiring contract month.</li>
</ul>
 

For full contract specifications – <a href="https://www.sgx.com/derivatives/products/sgssfs">click here</a>. 
The examples discussed above make a basic case for the relevance of SSFs in hedging stock portfolios given portfolio weightings are dynamic, and as seen with these 10 stocks over the past 10 weeks to 10 years, diversified and outlier performances can require more precise hedging methods than what is provided through standard Index derivatives. There are much more applications of SSFs, including carry trading, index arbitrage, multiple strategies with pairs trading and cash equitisation. SSFs are both Specified Investment Products (SIP) and leveraged products are hence for investors who are willing to accept the risk of substantial losses exceeding 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 SIP qualified to invest in these instruments.
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Five of ASEAN’s 20 largest capitalised stocks, DBS, Singtel, UOB, OCBC and Wilmar are now tradable through futures contracts. The Single Stock Futures (SSFs) suite include another five industrial and consumer stocks that rank amongst ASEAN’s largest 200 stocks. 
	 
	
These 10 stocks can see significant variance in net institutional inflows and outflows, varying from net flows of -S$1.1 Billion for DBS to +S$80 million for Wilmar in the 2020 YTD. SSFs provide institutions more exactitude in managing these single stock exposures. 
	 
	Standardised contract multipliers vary from 500 shares for DBS to 10,000 shares for Thai Bev and Yangzijiang. With underlying stock prices varying from near S$20 to S$1.00, the individual multipliers and notional values are designed to make all 10 SSFs highly accessible.   

 

Today 10 Single Stock Futures (“SSFs”) have launched on Singapore Exchange, seeing 2,692 contracts traded, with most activity observed on SSFs that are based on Oversea-Chinese Banking Corp (“OCBC”), DBS Group Holdings (“DBS”) and Keppel Corporation.  
The 10 underlying stocks of the SSFs accounted for a combined market value of S$256 billion, and averaged daily turnover of S$590 million in the 2020 year to 10 June. This means the 10 underlying stocks are amongst the most traded companies to be listed on Singapore Exchange, as they make up approximately 30% of the combined market value of stocks in Singapore, and contributed 37% of the total Singapore stock market turnover in the 2020 year to 10 June.     10 Stocks with a History of Big Moves and Mixed Returns     
The 10 companies have maintained different performance histories over the 10 year period through to 10 June, with annualised returns ranging from 14.1% from Thai Beverage PCL to -1.5% for Wilmar International. During the 10 year period through to 10 June, Bloomberg data indicates the maximum drawdown was 47% for Thai Beverage PCL and 60% for Wilmar International, while Thai Beverage PCL maintain higher annualised volatility at 31%, than Wilmar International’s 23%.



      
    
    Annualised Total Return


SSFs enable investors to hedge exposures in these companies amidst such drawdowns and onsets of above average volatility. The SSFs also provide an efficient means to focus risk-to-reward on the performance differences between two companies. For instance, a pairs trade on Thai Beverage PCL and Wilmar International can be used to mitigate some of the systematic risks and focus exposure to unsystematic risks of the two key Consumer Good stocks.  
The recent performances of the relevant 10 stocks are tabled below and sort by market capitalisation. 
 




			Stocks
			
			
			Code
			
			
			ASEAN Market Cap  Rank 

			#
			
			
			Mkt Cap $B
			
			
			Total Return %

			2019
			
			
			Net Inst. Flow S$M 2019
			
			
			Total Return %

			31 Dec 19 - 23 Mar
			
			
			Net Inst. Flow S$M 

			31 Dec 19 - 23 Mar
			
			
			Total Return

			%

			23 Mar - 10 Jun
			
			
			Net Inst. Flow S$M 23 Mar - 10 Jun
			
			
			10 Year Total Return %
			
		


			DBS
			
			
			D05
			
			
			2
			
			
			59
			
			
			16
			
			
			-477
			
			
			-35
			
			
			-1017
			
			
			41
			
			
			-67
			
			
			157
			
		


			Singtel
			
			
			Z74
			
			
			5
			
			
			43
			
			
			21
			
			
			363
			
			
			-32
			
			
			-166
			
			
			16
			
			
			-352
			
			
			50
			
		


			OCBC Bank
			
			
			O39
			
			
			6
			
			
			43
			
			
			2
			
			
			-553
			
			
			-29
			
			
			-256
			
			
			29
			
			
			-315
			
			
			74
			
		


			UOB
			
			
			U11
			
			
			8
			
			
			39
			
			
			13
			
			
			-401
			
			
			-33
			
			
			-457
			
			
			31
			
			
			-480
			
			
			74
			
		


			Wilmar Intl
			
			
			F34
			
			
			18
			
			
			26
			
			
			36
			
			
			141
			
			
			-30
			
			
			51
			
			
			39
			
			
			31
			
			
			-14
			
		


			ThaiBev
			
			
			Y92
			
			
			27
			
			
			18
			
			
			49
			
			
			141
			
			
			-43
			
			
			-60
			
			
			47
			
			
			-15
			
			
			276
			
		


			Keppel Corp
			
			
			BN4
			
			
			54
			
			
			11
			
			
			19
			
			
			-170
			
			
			-26
			
			
			-14
			
			
			26
			
			
			38
			
			
			27
			
		


			Genting Sing
			
			
			G13
			
			
			70
			
			
			10
			
			
			-2
			
			
			-240
			
			
			-43
			
			
			-12
			
			
			56
			
			
			77
			
			
			-8
			
		


			YZJ Shipbldg
			
			
			BS6
			
			
			165
			
			
			4
			
			
			-7
			
			
			6
			
			
			-30
			
			
			-77
			
			
			35
			
			
			17
			
			
			23
			
		


			ComfortDelGro
			
			
			C52
			
			
			179
			
			
			4
			
			
			15
			
			
			24
			
			
			-42
			
			
			-143
			
			
			22
			
			
			-136
			
			
			72
			
		


			Max 
			
			
			 
			
			
			 
			
			
			 
			
			
			49
			
			
			363
			
			
			-26
			
			
			51
			
			
			56
			
			
			77
			
			
			276
			
		


			Min
			
			
			 
			
			
			 
			
			
			 
			
			
			-7
			
			
			-553
			
			
			-43
			
			
			-1017
			
			
			16
			
			
			-480
			
			
			-14
			
		


			Average
			
			
			 
			
			
			 
			
			
			 
			
			
			16
			
			
			 
			
			
			-34
			
			
			 
			
			
			34
			
			
			 
			
			
			73
			
		

 Source: SGX StockFacts, Bloomberg, Refinitiv (Data as of 10 June 2020)   A New Means to Enhance SG Portfolio Management  
Over the past 18 months, institutional investors have maintained different net exposures in the 10 stocks, in some instances these exposures were poles apart, as observed in the first 13 weeks of 2020, with Wilmar International recipient of S$51 million net buying by institutions and recipient of S$1.02 billion in net institutional selling. However, indiscriminate selling into the major market low on 23 March meant there was little differentiation across the 10 stocks in their price performances for the relevant period.     
The contrasts in stock exposures and performances can be better exemplified in 2019 and in the 2020 year from 23 March through to 10 June:



SSFs on Singapore Telecommunications (“Singtel”) and Oversea-Chinese Banking Corp (“OCBC”) could have provided a hedging edge to some institutions going into 2020. In 2019, Institutions were net buyers of Singtel with a net buy amount of S$363 and net sellers of OCBC with a net sell amount of S$553 million. There was also a significant performance differential between the two heavyweight stocks that year of 19 percentage points, with Singtel generating a 21% total return and OCBC generating a total return of 2%. For examples sake, Institutions maintaining a portfolio that had three times as much exposure to Singtel as OCBC going into 2020, could have used the SSFs to better match their underlying position than an Index derivative with similar exposure to both stocks. 
	 
	
The impact on the portfolio of Genting Singapore’s recent outpacing of United Overseas Bank (“UOB”) could also make a case for SSF over Index Derivatives. Between 23 March and 10 June, UOB saw S$480 million in net selling from institutions, while Genting Singapore saw net buying of S$77 million. This coincided with Genting Singapore generating a 56% total return, outpacing the returns of UOB over the period which were 31%. Hence, assuming the institutional investor has not rebalanced the portfolio in the interim, the portfolio position in Genting Singapore would have grown to be relatively larger than UOB. Hence SSF’s in this instance would allow institutional investors to construct a more precise hedge closer to their actual weightings than the given Index derivative weightings.    


 
 With underlying stock prices varying from near S$20 to S$1.00, the individual multipliers and notional values are designed to make all 10 SSFs highly accessible. Standardised contract multipliers currently vary from 500 shares for SSFs on DBS to 10,000 shares for SSFS on Thai Beverage PCL and Yangzijiang Shipbuilding. This means, for example sake:


The minimum transaction size for taking a long or short position in the June 2020 contract of the DBS SSF (“YDBS”) at prevailing price of S$21.000, the notional value of the position would be 500 shares x S$21.000 = S$10,500. If the YDBS price moves from S$21.000 to S$21.005, the change in the notional value of one contract would be S$2.50 to S$10.502.50. Note the last trading day of the June 2020 YDBS contract is 29 June, the second last business day of the expiring contract month. 
	 
	The minimum transaction size for taking a long or short position in June 2020 contract of the Thai Beverage PCL SSF (“YTBE”) at the prevailing price of S$0.680 would be 10,000 shares x S$0.680 = S$6,800. If the YTBE price moves from S$0.680 to S$0.679, the change in the notional value of one contract would be S$10 to S$6,790. Note the last trading day of the June 2020 YTBE contract is 29 June, the second last business day of the expiring contract month.

 

For full contract specifications – click here.   
The examples discussed above make a basic case for the relevance of SSFs in hedging stock portfolios given portfolio weightings are dynamic, and as seen with these 10 stocks over the past 10 weeks to 10 years, diversified and outlier performances can require more precise hedging methods than what is provided through standard Index derivatives. There are much more applications of SSFs, including carry trading, index arbitrage, multiple strategies with pairs trading and cash equitisation.  SSFs are both Specified Investment Products (SIP) and leveraged products are hence for investors who are willing to accept the risk of substantial losses exceeding 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 SIP qualified to invest in these instruments.



10 Single Stock Futures to Enhance SG Portfolio Management