SGX derivatives volume rises 16% on rising hedging by global investors

SINGAPORE Exchange (SGX) recorded a 16 per cent increase in derivatives traded volume in August to 23.7 million contracts, on both a month-on-month and year-on-year basis.

Derivatives daily average volume rose 7 per cent on the month to one million contracts in August, with broad-base gains across foreign exchange (FX), commodities and equities.

This is amid China’s stimulus efforts, which have driven more international investors to turn to SGX to manage risk, said the bourse operator in its monthly market statistics report released on Wednesday (Sep 13).

The total FX futures traded volume reached an all-time high, up 26 per cent to 4.2 million contracts. The average daily volume also hit a record notional of almost US$12 billion.

SGX said that growing uncertainties on the interest rate outlook have pushed investors to beef up currency risk management.

Commodity derivatives traded volume also registered an all-time high, rising 52 per cent to five million contracts compared with the same period last year.

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The daily average volumes of iron ore, rubber and dairy derivatives all hit records.

In particular, the benchmark iron ore volume increased 54 per cent on the year to 4.5 million contracts, boosted by uncertainties in China’s property market.

On securities, the total market turnover value gained 10 per cent on the month to S$23.6 billion, while securities daily average value (SDAV) increased 5 per cent to S$1.1 billion.

However, as more than 100 stocks were going ex-dividend, the Straits Times Index (STI) fell 4.2 per cent to 3,233.3 on the month, SGX added.

It also noted that secondary fundraising gained 5 per cent on the year to S$214.4 million, as SGX-listed companies continued to tap the equity capital markets in August.

Despite the year-to-date securities market turnover value and the SDAV tracking 6 per cent and 4 per cent higher than the previous financial year, respectively, RHB noted that the implied SDAV forecast for FY2024 is 6.5 per cent below its estimate.

In a report on Thursday, the research house maintained its “neutral” call for SGX with a S$10.30 price target, which is at 3.4 per cent of the FY2024 yield.

RHB analyst Shekhar Jaiswal highlighted that fixed income, currencies and commodities will remain the key growth driver for SGX over the forecast years.

But SGX’s near-term growth also faces downside risks in the macro environment and potential interest rate fall.

Jaiswal added: “Macroeconomic uncertainty will weigh on new IPO (initial public offering) listings and cash equity trading volume. We expect a dip in treasury income amidst an eventual fall in interest rates.”

He also noted that although SGX is guiding to deliver a growing dividend per share over the medium term, its yield is well below market yield.

For the financial year ended June, SGX’s dividend yield was 3.3 per cent.

STI’s total return stood at 3.8 per cent, for the first eight months of the year.

The Singapore stock market also recorded net institutional inflow of S$408 million and net retail inflow of S$600 million in August.