Investors’ appetite in Singapore is increasingly growing risk-averse amid heightened fears of China’s slowing economy and a trade war with the US as well as the uncertainty around emerging markets
The turnover value of structured warrants and Daily Leveraged Certificates (DLCs) in Singapore dropped over 20% in September from the previous month to S$1.43 billion (US$1.03 billion), according to the Singapore Exchange (SGX). Year on year, turnover was down 26%.
September figures marks a stark contrast from July this year when the exchange saw its best month since 2009. The total value traded in leveraged products, including both structured warrants and DLCs, rose a whopping 70% on-year to S$2.33 billion. Since then, the turnover of structured products on the SGX has been on a downward trend as market uncertainty around China materialised.
The exchange’s structured products business is mainly made up of warrants with the turnover standing at around S$1.33 billion in September. Most of them are index warrants tracking Chinese equities. There are 21 live products tracking the Hang Seng Index, according to SRP data.
The exchange explained though that the average turnover for its leveraged products in the third quarter was broadly in line with that of the beginning of this year, when excluding July. “Average daily turnover for the August and September period was S$80m, which is comparable to the average S$82m registered in the first half of 2018,” said the SGX spokesperson.
However, the overall volume of structured products in regional markets have generally declined after a strong first quarter this year, according to SGX. “In general, demand for structured products can be cyclical as it is dependent on investors’ risk appetite and global financial market conditions,” said the SGX official.
The slowdown in market activities has not only been obvious in Singapore, but across the whole Asia region. After hitting roughly HKD$44 billion in average daily turnover in January this year, the figure for Hong Kong warrants business more than halved to HKD$20 billion last month, according to the Hong Kong Exchange. The sales volume of warrants together with Callable Bull/Bear contracts (CBBCs) came in at roughly HKD$50 billion so far this year, accounting for nearly 80% of the total sales volume of Hong Kong’s structured products market, according to SRP data.
The SGX’s monthly report on market statistics also showed that turnover of exchange-traded funds (ETFs) dropped by more than 50% in September from a month earlier to S$188m, but was up 12% from 2017. The rise came amid regional equities sell-off that allowed investors to trade at attractive valuations.