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Upcoming New Initiatives May Give SGX The Boost It Needs

SGX saw improved trading velocity in Aug 21 as volumes remained above pre-pandemic levels. Total futures open interest rose by 3.5% mom, indicating strong risk management demand. There is impending competition with the launch of HKEX’s A Share Index Futures. SGX revised its guidelines to make Special Purpose Acquisitions Companies (SPAC) more attractive. Maintain HOLD with the same target price of
S$11.65.

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WHAT’S NEW

Improved trading velocity in Aug 21. For August, total securities turnover value increased 4.7% mom while securities daily average value (SDAV) improved to S$1.25b (+4.7% mom). Total trading volumes softened slightly by 2% mom, making August the lowest month ytd. However, as compared with pre-pandemic levels (Aug 19), total trading volumes are still 10% higher on a yoy basis.

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Derivatives volumes softened mom but are expected to trend upwards. Total derivatives trading volume in Aug 21 dipped 4% mom along with the daily average volume decreasing by 4% mom as well. The mom decreases in derivatives volumes were largely contributed by a normalisation of risk management demand due to an outperformance in Jul 21. Total futures open interest rose by 3.5% mom, indicating strong risk management demand in key Asian economies. Increased uncertainty over China’s recovery and an economic rebound in India resulted in steady yoy growths in China A50 Index Futures (+4.4% yoy, -5.2% mom) and Nifty 50 Index Futures (+1.5% yoy, -4.8% mom) respectively.

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Forex and commodity hedging outperforms. Forex daily contracts traded remain robust (+6.7% yoy, -8.0% mom) as price swings and supply-chain disruptions continued to challenge physical markets. SGX’s USD/CNH futures volume rose by +12.0% yoy with month-end open interest at a record high. Led by strong growth (+3.8% yoy, +11.6% mom) in iron ore derivatives, commodity derivatives’ trading volume grew strongly by 10.0% yoy.