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Trading mania fuelled by outbreak a boon for SGX – The Straits Times

Trading mania fuelled by outbreak a boon for SGX  The Straits Times

Singapore Exchange (SGX) is benefiting from the frenzied buying and selling of assets that the coronavirus outbreak has triggered.

The bourse, which allows the exchange of products from Singapore shares to FTSE China A50 Index to currency futures, saw its securities market’s trading surge 44 per cent to $27.5 billion last month from the same period a year ago. Average daily volume of derivatives hit a record 1.24 million contracts, it said on Monday.

That has led brokerages, including Credit Suisse Group, Citigroup and CGS-CIMB Securities International, to upgrade SGX shares this month, touting the South-east Asian venue as a key beneficiary of market volatility.

“SGX’s velocity has a positive correlation with volatility,” Credit Suisse analysts wrote in a note on Tuesday, raising the counter to neutral from underperform.

The continued uncertainty over the coronavirus’ impact is causing massive swings in markets, boosting trading across the globe. Like SGX, JPMorgan Chase and Citigroup are among those that have said they benefited from the frantic dealings, highlighting the revenue boost from equity derivatives.

Derivatives trading accounted for half of SGX’s 2019 revenue, data compiled by Bloomberg shows.

The bourse said that last month, futures on the Indian rupee and on the Nikkei 225 Stock Average were among the most popular.

It also highlighted the surge in volume for exchange-traded funds (ETFs), which jumped 245 per cent from a year ago to $356 million in value, with that of gold and bond ETFs up by six times.

“The uncertainties have driven demand for risk management in equities, foreign exchange and commodities,” said an exchange spokesman.

According to a statement on Monday, there was a “surge in participation outside of Asian time zones”, underscoring growing demand from Europe and the United States.

Citigroup and CIMB upgraded SGX to the equivalent of a buy rating. The US bank said the current volatility is likely to help not only the bourse’s equity-index products but also “newer growth engines” such as foreign exchange and higher-margin commodities derivatives, while CIMB called the stock a safer haven.

  • 44%

  • Surge in trading in SGX’s securities market to $27.5 billion last month from the same period a year ago. 

  • 1.24m

  • Average daily volume of derivatives traded, a record number of contracts. 

  • 245%

  • Surge in volume for exchange-traded funds from a year ago, to $356 million in value.

SGX shares have not been immune to the global equity rout. They have lost 8.4 per cent from a high last month, and only five brokerages recommend buying them, compared with six holds and four sells, according to data compiled by Bloomberg. Still, the stock is the third-best performer in the Straits Times Index this year.

SGX shares have not been immune to the global equity rout. They have lost 8.4 per cent from a high last month, and only five brokerages recommend buying them, compared with six holds and four sells, according to data compiled by Bloomberg. Still, the stock is the third-best performer in the Straits Times Index this year.

There are encouraging trends even for other parts of SGX’s business. The bourse acquired in January a majority stake in Scientific Beta, an index provider that specialises in factor-based strategies, and Credit Suisse sees revenue doubling for the unit’s data, connectivity and index business in the next five years.

In the meantime, “we expect the momentum in both derivatives and securities to remain strong”, wrote the analysts.

BLOOMBERG

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Source: straitstimes.com

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