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 FX volume at US$1.51 trillion, up 5.2% from US$1.43 trillion in 2020</li>
	<li>26.5 million contracts traded in 2021, up 4% from 25.5 million in 2020</li>
	<li>Year-end aggregate open interest at US$11.2 billion, up 11% y-o-y</li>
</ul>
COVID-19 remained top driver of economic and market activity in 2021

2021 saw central banks around the world strive to achieve balanced and stable economic growth. With the Delta variant spreading globally since mid-December 2020, governments rolled out various monetary stimulus measures and vaccination programmes to hasten the recovery of labour and capital markets.

Economic stimulus quickly proved effective in the US, with inflation rates exceeding the Fed’s 2% target by April, and unemployment rates gradually decreasing to pre-pandemic levels. The 8-month period of high inflation was labelled as “transitory” by the Fed, which continued its asset purchases, while fears of stagflation started to build. Global supply shortages caused by supply chain disruptions and persistent demand for goods during the pandemic resulted in a sustained higher-than-expected inflation, prompting the Fed to drop the “transitory” label by October and start tapering its bond purchases.

The Fed’s tapering has resulted in the broad strengthening of the dollar against a basket of key currencies, as global investors gained confidence in the US economy and started to anticipate rate hikes in early 2022. In December, the Fed quickened the rate of tapering, decreasing bond purchases by US$30 billion each month, as compared to US$15 billion before. 

Amidst the increasing hawkishness of several central banks, the emergence of the Omicron variant in November threw in yet another layer of uncertainty. However, the impact of Omicron fears on the financial markets were mostly short-lived – by end-December, risk appetite started to return to the markets with early signals that the variant, though more transmissible, causes milder symptoms. US stocks soared over the Christmas holidays, with the S&amp;P500 index hitting a historic high on 29 December. On the FX front, the growing risk-on sentiment bodes well for emerging-market currencies.  
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USD/CNH Futures hit a record high daily volume of 110,246 contracts in December

<ul>
<li>Aggregate trading volume for SGX USD/CNH Futures in December at US$86.5 billion; almost flat y-o-y</li>
	<li>2021 trading volume for SGX USD/CNH Futures at US$1.05 trillion; up 4.2% y-o-y</li>
	<li>On 9 December 2021, SGX USD/CNH Futures hit a new single day volume record of 110,246 contracts amounting to $11.02 billion USD in notional terms</li>
</ul>
Monetary policy set out by the PBOC and the Fed started to diverge since February 2021. China recovered faster than other major economies in 2020 and IMF projects that 2021 GDP growth will hit 8%, surpassing Beijing’s 6% growth target. The strong rebound was driven by China’s exports and a decrease in overseas travel by the Chinese. As such, the PBOC focused on tightening monetary stimulus while the Fed continued its asset purchases.

The retracement of monetary support led to a gradual slowdown in China’s economic expansion in the second half of 2021, with the manufacturing headline PMI staying below 51 since July. Power shortages, surging oil prices, and a narrowing account surplus also weighed on China’s economy.

Evergrande’s potential default rattled the stock market in September and affected investor confidence. Its default in December while largely priced in, uncertainties facing its restructuring and the PBOC’s resolve not to bail out the property developer continue to weigh on China’s recovery. Meanwhile, the PBOC released in December its 6-step plan to encourage well-regulated M&amp;A deals in China’s real estate sector.

Headwinds against China’s economy caused yet another divergence from the Fed in terms of monetary policy. While the Fed has taken on a hawkish tone, the PBOC has become increasingly dovish in a bid to support its economy. In December, the PBOC injected a net amount of 570 billion yuan into the market through bond repurchases to provide a boost for companies. The 1-year Loan Prime Rate (LPR) was also cut to 3.8%, making borrowing more attractive. The Reserve Requirement Ratio was cut by 50 basis points in June and December, releasing 1 trillion yuan and 1.2 trillion yuan worth of liquidity into the interbank system, respectively.

The PBOC also showed its discomfort with the yuan’s appreciation against the dollar, by raising the FX reserve requirement ratio from 5% to 7% in June, followed by an adjustment from 7% to 9% in December. These have been the first hikes since 2007. The PBOC has set its daily reference rate at a weaker-than-expected level for 15 straight sessions -- the longest record since 2018. This seeks to protect the export-based economy’s competitive pricing advantage in global markets.

These changes led to a period of high volatility spanning the month of December, with a new daily  record  volume of 110,246 contracts (US$11 billion) traded on 9 December. Volatility trended lower towards the year end when major markets closed for Christmas. SGX USD/CNH Futures volume was down 0.78% m-o-m in December to US$86.5 billion, with month-end open interest up 12% y-o-y at US$9.9 billion (101,304 contracts).
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SGX INR/USD Futures volume up 2% y-o-y to US$404 billion

<ul>
<li>Aggregate trading volume for SGX INR/USD Futures in December at US$26.3 billion, up 1.2% m-o-m</li>
	<li>2021 trading volume of SGX INR/USD Futures at US$404 billion; up 2% y-o-y</li>
	<li>SGX’s market share of global INR/USD futures grew to 72.6%, up from 62.% in 2020</li>
</ul>
The Indian rupee’s strength has been consistently tied to concerns over Covid-19, with the greatest depreciation of the currency against the dollar closely following the emergence of new variants. High inflation has also been a main cause of downward pressure on the INR/USD currency pair, with the rupee hitting the year’s lowest in April after CPI surged to a 5.5% y-o-y increase in March, the highest inflation India has experienced since 2018. 

To support economic growth in the face of record high Covid-19 cases, the RBI committed to bond purchases in April, and announced 1.2 trillion rupees worth of bond purchases under G-Sec Acquisition Programme (GSAP 2.0) in June. Bond purchases stopped in October, when the RBI decided that sufficient liquidity has been injected into the market. This is in line with the RBI’s accommodative stance, which they have committed to “as long as necessary”.

In December, the rupee dipped to an 18-month low, following the RBI’s decision to keep repo rates unchanged at 4%. Omicron fears, and the Fed’s contrasting, more hawkish decision to quicken tapering, were also in line with expectations and weighed on the rupee.

However, the rupee posted gains towards the year’s end as Omicron fears subsided, and risk sentiment recovered in the markets. Falling oil prices also lent support to the rupee, as the Indian economy recovers from the energy shortage spanning the past few months.

SGX INR/USD Futures volume was up 1.2% m-o-m in December to US$26.3 billion, with month-end open interest up 4.4% y-o-y at US$1.1 billion (39,917 contracts).
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KRW/USD Futures volume in 2021 surged 30% y-o-y to US$12.3 billion

<ul>
<li>Aggregate trading volume of SGX KRW/USD Futures in December at US$1.21 billion, up 12.1% y-o-y and up 17.8% m-o-m</li>
	<li>Year-end open interest for SGX KRW/USD Futures at US$183 million (8,500 contracts), up 45% y-o-y</li>
</ul>
In 2021, the KRW/USD currency pair was on a general downward trend, with steady won depreciation against the backdrop of a hawkish Fed and high equity outflows. The BOK has intervened to prevent the won from weakening further, raising South Korea’s base rate by 25 bps to 0.75% in August, and again by 25 bps to 1% in November. As of end-2021, South Korea remains the only Asian country to continue interest rate hikes.

Market watchers speculate another rate hike in the first quarter of 2022, which BOK Governor Lee Ju-yeol has confirmed is possible. The BOK remains hawkish as it strives to tame household debt and rising consumer prices, which have increased by 3.7% y-o-y in December. According to IMF and BoK projections, South Korea’s economic growth is expected to slow down, at  3-3.3% in 2022.  Nevertheless, rising export prices and subsiding Omicron fears have  boosted confidence on South Korean’s economy.

In December, US$1.2 billion (or 54,240 contracts) of SGX KRW/USD Futures were traded, up 22% m-o-m. Daily average volume in November 2021 was at US$52.6 million, up 13% m-o-m and 7% y-o-y. Month-end open interest was at US$183 million (or 8,500 contracts), up 4% m-o-m and 45% y-o-y.
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Aggregate FX volume at US$1.51 trillion, up 5.2% from US$1.43 trillion in 2020
	26.5 million contracts traded in 2021, up 4% from 25.5 million in 2020
	Year-end aggregate open interest at US$11.2 billion, up 11% y-o-y

COVID-19 remained top driver of economic and market activity in 2021

2021 saw central banks around the world strive to achieve balanced and stable economic growth. With the Delta variant spreading globally since mid-December 2020, governments rolled out various monetary stimulus measures and vaccination programmes to hasten the recovery of labour and capital markets.

Economic stimulus quickly proved effective in the US, with inflation rates exceeding the Fed’s 2% target by April, and unemployment rates gradually decreasing to pre-pandemic levels. The 8-month period of high inflation was labelled as “transitory” by the Fed, which continued its asset purchases, while fears of stagflation started to build. Global supply shortages caused by supply chain disruptions and persistent demand for goods during the pandemic resulted in a sustained higher-than-expected inflation, prompting the Fed to drop the “transitory” label by October and start tapering its bond purchases.

The Fed’s tapering has resulted in the broad strengthening of the dollar against a basket of key currencies, as global investors gained confidence in the US economy and started to anticipate rate hikes in early 2022. In December, the Fed quickened the rate of tapering, decreasing bond purchases by US$30 billion each month, as compared to US$15 billion before. 

Amidst the increasing hawkishness of several central banks, the emergence of the Omicron variant in November threw in yet another layer of uncertainty. However, the impact of Omicron fears on the financial markets were mostly short-lived – by end-December, risk appetite started to return to the markets with early signals that the variant, though more transmissible, causes milder symptoms. US stocks soared over the Christmas holidays, with the S&amp;P500 index hitting a historic high on 29 December. On the FX front, the growing risk-on sentiment bodes well for emerging-market currencies.  



      
    
    202201_1E


USD/CNH Futures hit a record high daily volume of 110,246 contracts in December


Aggregate trading volume for SGX USD/CNH Futures in December at US$86.5 billion; almost flat y-o-y
	2021 trading volume for SGX USD/CNH Futures at US$1.05 trillion; up 4.2% y-o-y
	On 9 December 2021, SGX USD/CNH Futures hit a new single day volume record of 110,246 contracts amounting to $11.02 billion USD in notional terms

Monetary policy set out by the PBOC and the Fed started to diverge since February 2021. China recovered faster than other major economies in 2020 and IMF projects that 2021 GDP growth will hit 8%, surpassing Beijing’s 6% growth target. The strong rebound was driven by China’s exports and a decrease in overseas travel by the Chinese. As such, the PBOC focused on tightening monetary stimulus while the Fed continued its asset purchases.

The retracement of monetary support led to a gradual slowdown in China’s economic expansion in the second half of 2021, with the manufacturing headline PMI staying below 51 since July. Power shortages, surging oil prices, and a narrowing account surplus also weighed on China’s economy.

Evergrande’s potential default rattled the stock market in September and affected investor confidence. Its default in December while largely priced in, uncertainties facing its restructuring and the PBOC’s resolve not to bail out the property developer continue to weigh on China’s recovery. Meanwhile, the PBOC released in December its 6-step plan to encourage well-regulated M&amp;A deals in China’s real estate sector.

Headwinds against China’s economy caused yet another divergence from the Fed in terms of monetary policy. While the Fed has taken on a hawkish tone, the PBOC has become increasingly dovish in a bid to support its economy. In December, the PBOC injected a net amount of 570 billion yuan into the market through bond repurchases to provide a boost for companies. The 1-year Loan Prime Rate (LPR) was also cut to 3.8%, making borrowing more attractive. The Reserve Requirement Ratio was cut by 50 basis points in June and December, releasing 1 trillion yuan and 1.2 trillion yuan worth of liquidity into the interbank system, respectively.

The PBOC also showed its discomfort with the yuan’s appreciation against the dollar, by raising the FX reserve requirement ratio from 5% to 7% in June, followed by an adjustment from 7% to 9% in December. These have been the first hikes since 2007. The PBOC has set its daily reference rate at a weaker-than-expected level for 15 straight sessions -- the longest record since 2018. This seeks to protect the export-based economy’s competitive pricing advantage in global markets.

These changes led to a period of high volatility spanning the month of December, with a new daily  record  volume of 110,246 contracts (US$11 billion) traded on 9 December. Volatility trended lower towards the year end when major markets closed for Christmas. SGX USD/CNH Futures volume was down 0.78% m-o-m in December to US$86.5 billion, with month-end open interest up 12% y-o-y at US$9.9 billion (101,304 contracts).



      
    
    202201_2E

      
    
    202201_3E


SGX INR/USD Futures volume up 2% y-o-y to US$404 billion


Aggregate trading volume for SGX INR/USD Futures in December at US$26.3 billion, up 1.2% m-o-m
	2021 trading volume of SGX INR/USD Futures at US$404 billion; up 2% y-o-y
	SGX’s market share of global INR/USD futures grew to 72.6%, up from 62.% in 2020

The Indian rupee’s strength has been consistently tied to concerns over Covid-19, with the greatest depreciation of the currency against the dollar closely following the emergence of new variants. High inflation has also been a main cause of downward pressure on the INR/USD currency pair, with the rupee hitting the year’s lowest in April after CPI surged to a 5.5% y-o-y increase in March, the highest inflation India has experienced since 2018. 

To support economic growth in the face of record high Covid-19 cases, the RBI committed to bond purchases in April, and announced 1.2 trillion rupees worth of bond purchases under G-Sec Acquisition Programme (GSAP 2.0) in June. Bond purchases stopped in October, when the RBI decided that sufficient liquidity has been injected into the market. This is in line with the RBI’s accommodative stance, which they have committed to “as long as necessary”.

In December, the rupee dipped to an 18-month low, following the RBI’s decision to keep repo rates unchanged at 4%. Omicron fears, and the Fed’s contrasting, more hawkish decision to quicken tapering, were also in line with expectations and weighed on the rupee.

However, the rupee posted gains towards the year’s end as Omicron fears subsided, and risk sentiment recovered in the markets. Falling oil prices also lent support to the rupee, as the Indian economy recovers from the energy shortage spanning the past few months.

SGX INR/USD Futures volume was up 1.2% m-o-m in December to US$26.3 billion, with month-end open interest up 4.4% y-o-y at US$1.1 billion (39,917 contracts).



      
    
    202201_4E


KRW/USD Futures volume in 2021 surged 30% y-o-y to US$12.3 billion


Aggregate trading volume of SGX KRW/USD Futures in December at US$1.21 billion, up 12.1% y-o-y and up 17.8% m-o-m
	Year-end open interest for SGX KRW/USD Futures at US$183 million (8,500 contracts), up 45% y-o-y

In 2021, the KRW/USD currency pair was on a general downward trend, with steady won depreciation against the backdrop of a hawkish Fed and high equity outflows. The BOK has intervened to prevent the won from weakening further, raising South Korea’s base rate by 25 bps to 0.75% in August, and again by 25 bps to 1% in November. As of end-2021, South Korea remains the only Asian country to continue interest rate hikes.

Market watchers speculate another rate hike in the first quarter of 2022, which BOK Governor Lee Ju-yeol has confirmed is possible. The BOK remains hawkish as it strives to tame household debt and rising consumer prices, which have increased by 3.7% y-o-y in December. According to IMF and BoK projections, South Korea’s economic growth is expected to slow down, at  3-3.3% in 2022.  Nevertheless, rising export prices and subsiding Omicron fears have  boosted confidence on South Korean’s economy.

In December, US$1.2 billion (or 54,240 contracts) of SGX KRW/USD Futures were traded, up 22% m-o-m. Daily average volume in November 2021 was at US$52.6 million, up 13% m-o-m and 7% y-o-y. Month-end open interest was at US$183 million (or 8,500 contracts), up 4% m-o-m and 45% y-o-y.



      
    
    202201_5E

SGX FX Futures aggregate volume surged past US$1.5 trillion in 2021