SGX China Equity Index Derivatives Monthly Commentary

Transcription

1 5:: PM 5:3: PM 6:: PM 6:3: PM 7:: PM 7:3: PM 8:: PM 8:3: PM 9:: PM 9:3: PM 1:: PM 1:3: PM 11:: PM 11:3: PM 12:: AM 12:3: AM 1:: AM 1:3: AM Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Daily Average Volume Open Interest 9:: AM 9:3: AM 1:: AM 1:3: AM 11:: AM 11:3: AM 12:: PM 12:3: PM 1:: PM 1:3: PM 2:: PM 2:3: PM 3:: PM 3:3: PM 4:: PM 4:3: PM Bid/Offer Spread (as % of Bid Price) in b.p. Average Traded Volume July 216 SGX China Equity Index Derivatives Monthly Commentary Market Overview Chinese A-share benchmark indices CSI3 Index and FTSE China A5 Index gained 1.6% and 1.5% respectively in July. The indices have risen 2.7% and 2.2% respectively since June 23, when the U.K. voted to leave the European Union, placing China s stock market among the world s best post-brexit performers. SGX FTSE China A5 index futures traded 5,23,74 contracts in July. Average daily volume fell 6% month-on-month to 239,194 contracts. The contract enjoyed a robust roll market in July. Month-end open interest grew 12% month-on-month to 623,643 contracts, or approximately US$6b in notional value, as customers continued to look to the futures contract for their hedging needs. SGX MSCI China Index Futures, which tracks the MSCI China Free Index, a subset of the MSCI EM Index, traded a total of 3,782 contracts in July. Investors trading the SGX FTSE China A5 and MSCI China futures contract can enjoy up to 6% in margin discounts. China s financial sector was in the limelight in late July, as news of tight regulatory scrutiny over wealth management products and the downgrading of 57 Chinese brokerages in a CSRC s 216 rating report exerted selling pressure on China s financial stocks. 7, 6, 5, SGX FTSE China A5 Index Futures Volume & Open Interest Daily Average Volume 7, 6, 5, July 216 Average Bid Offer Spread and Traded Volume 3, 25, 2, 15, 1, 5, 4, 4, 3, 3, T 2, 2, Volume Spread 1, 1, Source: SGX and Bloomberg (data as of 29 July 216) T + 1

2 Eurostoxx5-1.6% S&P5, 2.9% Nikkei 225, 2.% CSI3, 2.8% FTSE China A5 2.2% MSCI China Free, 3.7% Hang Seng, 4.9% NIFTY Index, 4.5% TWSE Index, 3.5% KOSPI Index 1.5% SGX FTSE China A5 Futures traded 5,23,71 contracts in July, which translates to an average daily turnover of approximately US$2.3b. The contract saw a strong roll in July, with open interest growing 12% month-on-month to 623,643 contracts (US$5.9b) as of end July. The contract has attracted long-term investors and hedgers with positions going out to June 217. Hedging cost for cash investors has reduced significantly as futures prices come closer to fair value, following a period of extreme market volatility. In July, the SGX FTSE China A5 futures calendar spread market narrowed to almost par. As shown in the Bloomberg page below, SGX s futures calendar spread contracts are actively quoted and traded throughout the month. Supported by a wide base of institutional traders, the bid/offer spread averages less than 3 basis points (1 tick spread). Bloomberg screen on SGX FTSE China A5 Index Futures Generic 1 st and 2 nd month calendar spread order book (as of 3 August 16) Futures Price over Cash Index ETF Price over NAV Average SGX FTSE China Spot Mth Futures Price/ Cash -.3% SGX FTSE China 2nd Mth Futures Price/ Cash -.4% CFFEX CSI3 Spot Mth Futures Price / Cash -.8% CFFEX CSI3 2nd Mth Futures Price / Cash -1.8% ishares FTSE A5 China Index (2823 HK) ETF Price/ NAV -5.7% CSOP FTSE HKD (2822 HK) ETF Price/ NAV -.3% Harvest CSI 3 China A-Shares ETF (ASHR US) Price/NAV Source: Bloomberg,.2% July 16. Chinese equity market was among the top performers immediately post Brexit. Having a market semi-closed to foreigners helped insulate its shares from global turmoil. From the Brexit announcement to end July, Chinese A-shares rallied close to 3%, providing some respite for investors who ve endured a 4% percent plunge in the Chinese equity market since last year s peak and MSCI s refusal in June to add China A-shares into its benchmark indices. MSCI China Free Index SM, which consists of overseas listed Chinese shares including Hong Kong listed H-shares, P chips, Red chips and U.S. listed ADRs gained close to 4% by end July. SGX has recently launched futures and options contracts based on the MSCI China Free Index SM, offering investors exposure to new industries driving China s economic growth. Unlike the Hang Seng China Enterprise Index (HSCEI) which has no exposure to the IT sector, MSCI China Free index SM has a broad representation of sectors including financial, IT and consumer companies. 5% Index Returns Post Brexit (23 Jun - 29 July 216) 4% 3% 2% 1% % -1% -2%

3 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Jan 13 Feb 13 Apr 13 May 13 Jul 13 Aug 13 Oct 13 Nov 13 Jan 14 Feb 14 Apr 14 May 14 Jul 14 Aug 14 Oct 14 Nov 14 Jan 13 Feb 13 Apr 13 May 13 Jul 13 Aug 13 Oct 13 Nov 13 Jan 14 Feb 14 Apr 14 May 14 Jul 14 Aug 14 Oct 14 Nov 14 Dec 11 Mar 12 Jun 12 Sep 12 The depreciation of Yuan against the USD continued in the month of July and hit the lowest level since October 21 as it briefly crossed 6.7. The currency was then promptly defended as PBOC strengthened the Yuan and kept it within the 6.62 to 6.7 range. Trading of SGX USD/CNH futures remained robust since April with a competitive bid-ask spread and increasing market participants and volumes. The contract enjoys a 2% margin offset with the SGX FTSE China A5 futures contract. 53 Caixin China Manufacturing PMI SA (MOM) 2.2 China GDP Constant Price SA (QoQ) China Import and Export Trade Balance (USD Billions) 6.8 USDCNH Currency China Economic Events Source: Bloomberg Date Event Period Economist Survey Median Prior 9-Aug-16 CPI YoY July 1.8% 1.9% 9-Aug-16 PPI YoY July -2.% -2.6% 12-Aug-16 Industrial Production YoY July 6.2% 6.2% 12-Aug-16 Retail Sales YoY July 1.5% 1.6% Source: Bloomberg (data as of 8 August 216)

4 Contract Specifications SGX FTSE China A5 Index Futures Contract Size Ticker Symbol Contract Months Tick Value Trading Hours (Singapore Time) Last Trading Day (LTD) Daily Price Limits US$ 1 x FTSE China A5 Index Futures Price CN 2 nearest serial months and Mar, Jun, Sep and Dec months on 1-year cycle 2.5 index point (US$2.5) T Session: 9.am 4.3pm T+1 Session: 5.15pm 2.am Second last business day of the contract month Whenever the price moves by 1% in either direction from previous day settlement price, trading at or within a price limit of 1% is allowed for the next 1 minutes. Thereafter, trading is allowed at or within a price limit of 15% in either direction from the previous day s settlement price. When this limit is reached, there shall be a further 1-minute Cooling off Period* in which trading is allowed at or within a price limit of 15%. After which, there shall be no price limits for the remainder of the trading day. There shall be no price limits on the last trading day of the expiring contract month. Position Limits Final Settlement Price Settlement Basis Margins Offset Negotiated Large Trade Price Information (Vendor: Ticker) With regards to the T+1 session, the Daily Settlement Price (DSP) derived in the T session that just ended will be the reference price to determine price limits. A person shall not own or control more than 15, contracts net long or net short in all Contract Months combined, unless otherwise separately approved by the Exchange. The Final Settlement Price shall be the official closing price of FTSE China A5 Index rounded to the nearest 2 decimal places. Cash settled (USD) Yes Minimum 5 lots Thomson Reuters: SFC:<F3> Bloomberg: XUA <INDEX> CT SGX MSCI China Index Futures Contract Size Ticker Symbol Contract Months Tick Value Trading Hours (Singapore Time) Last Trading Day (LTD) Daily Price Limits USD 5 x SGX MSCI China Index Futures Price CH 2 nearest serial months and March, June, September and December months on a 1 year cycle 2 index point (US$2.) T Session: 9.am 4.3pm T+1 Session: 5.15pm 2.am Second last business day of the contract month Whenever the price moves by 1% in either direction, from the previous day's settlement price, trading at or within the price limit of +/-1% is allowed for the next 1 minutes. Thereafter when the price moves by 15% in either direction, from the previous day's settlement price, trading at or within the price limit of +/-15% is allowed for the next 1 minutes. After this cooling-off period has elapsed, there shall be no price limits for the remainder of the trading day. Position Limits Final Settlement Price Settlement Basis Margins Offset Negotiated Large Trade Price Information (Vendor: Ticker) There shall be no price limits on the last trading day of the expiring contract month. A person shall not own or control options and underlying MSCI China Index Futures contracts that exceed 15, futures-equivalent contracts net on the same side of the market in all contract months combined. The Final Settlement Price shall be the official closing price of MSCI China Free Index rounded to the nearest 2 decimal places. Cash settled (USD) Yes Minimum 5 lots Thomson Reuters: CH Bloomberg: CHWA *The Exchange will signal the commencement of the Cooling Off Period when there is an unsatisfied bid or offer at the prevailing Upper Price Limit or Lower Price Limit respectively for a continuous period of more than ten seconds. The Exchange retains the discretion to take into account any other factors in the market in determining the commencement of the Cooling Off Period. Source: Singapore Exchange Singapore Exchange 2 Shenton Way #2-2 SGX Centre 1 Singapore 6884 main: sgx.com

5 All rights in the FTSE China A5 Index (the Index ) vest in FTSE International Limited ( FTSE ). FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence. The SGX FTSE China A5 Index Futures (the "Product") has been developed solely by Singapore Exchange Derivatives Trading Limited. The Index is calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote the Product and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Product. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the Product or the suitability of the Index for the purpose to which it is being put by Singapore Exchange Derivatives Trading Limited." This document is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject SGX to any registration or licensing requirement. This document is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This document has been published for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Further information on this investment product may be obtained from Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Examples provided are for illustrative purposes only. While SGX and its affiliates have taken reasonable care to ensure the accuracy and completeness of the information provided, they will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Neither SGX nor any of its affiliates shall be liable for the content of information provided by third parties. SGX and its affiliates may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 11) of Singapore. The information in this document is subject to change without notice. Singapore Exchange 2 Shenton Way #2-2 SGX Centre 1 Singapore 6884 main: sgx.com