Singapore still rules China futures market

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SINGAPORE: Six months after Hong Kong launched fairness index futures to make it simpler for worldwide traders to guess on Chinese shares, Singapore still rules the market, though its Asian rival is making inroads.

Hong Kong’s contracts linked to 1 index of fifty of the biggest mainland-listed firms accounted for about 4% of quantity within the section in April, in response to Bloomberg calculations based mostly on information from the exchanges. By worth, the share rose to fifteen%.

Singapore Exchange Ltd (SGX) still instructions about 95% of the quantity, stated Krishna Guha, an analyst at Jefferies Financial Group Inc within the city-state, who has a purchase score on the bourse operator’s inventory. “While a competing product is always a threat to watch out for, so far it seems the impact can be managed.”

Hong Kong’s entry is a menace to SGX in a key enterprise for the South-East Asian bourse, the place it had held a monopoly since 2006.

SGX’s present product accounts for greater than half of its fairness derivatives buying and selling quantity, and by one estimate from Citigroup Inc, about 10% of its whole income. It’s the most recent space of rivalry for the 2 Asian monetary hubs, which additionally compete over inventory listings, asset administration and different components of derivatives buying and selling.

The competitors for traders looking for publicity to China’s nearly US$10 trillion (RM44 trillion) onshore equities market is predicated as a lot on selection of index as it’s on buying and selling venues.

Hong Kong Exchanges & Clearing Ltd launched its new A50 futures contract in October, monitoring the MSCI China A 50 Connect Index. Singapore’s are linked to the FTSE China A50 gauge. The MSCI measure has dropped 16% this yr, versus a 14% decline in its FTSE counterpart.

Hong Kong’s contracts have been helped by a waiver on buying and selling charges, in response to Guha. On high of that, the underlying index has extra balanced sector weightings, which permits for extra diversification.

By distinction, Singapore offers traders with higher liquidity after having held a monopoly within the market for a few years. It additionally has fewer public holidays than Hong Kong.

The common each day quantity for the Hong Kong contracts in April was 19,795, in response to the Hong Kong Exchanges and Clearing Ltd (HKEX). That compares to 481,011 for Singapore, SGX information confirmed. The common each day notional worth for the contracts that month was US$1.1bil (RM4.8bil) in Hong Kong, in contrast with US$6.4bil (RM28bil) for Singapore.

As far as inventory efficiency goes, shares of SGX have risen 6.1% this yr, whereas HKEX’s are down 26%.

Both sides try to cancel out the opposite’s benefits. FTSE Russell, which created the underlying index for Singapore’s contracts, introduced final month that it’s lowering the weighting of financials in its gauge and growing different sectors.

Meanwhile, HKEX allowed buying and selling for some non-Hong Kong greenback denominated futures on public holidays within the metropolis. Hong Kong’s contracts are still at an early stage, however HKEX is happy they’re being well-received, a spokesperson for the bourse stated.

SGX’s deep ecosystem in China A50 index futures can’t be replicated in a single day, stated Michael Syn, head of equities at SGX. “As the international A-share market expands, we expect trading activity and open interest to continue to grow,” he stated.

Revenue from each merchandise is anticipated to extend, Bloomberg Intelligence analyst Sharnie Wong wrote in a be aware in December.

While it has been shedding some market share to Hong Kong, Singapore’s A50 futures quantity has been rising.

Daily common quantity for April was up 5% in contrast with October, in response to bourse information.

Hong Kong’s contracts, in the meantime, have but to start out contributing to earnings given the price waiver, Bloomberg Intelligence’s Wong stated. But Bruce Pang, head of macro and technique analysis at China Renaissance Securities Hong Kong Ltd, a brokerage within the metropolis, stated that’s solely a matter of time.

“MSCI China A50 Connect futures will likely become a new driver” for HKEX within the second half of this yr, Pang stated. “We think its A50 Connect futures should encourage offshore investors to increase their allocation in A-shares.” — Bloomberg



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