SGX FX volume rises as investors bet on China reopening

abdelaziz Fathi

The Singapore Exchange (SGX) notched a healthy gain in its FX and derivatives volumes amid optimism over China’s economic outlook and signs that the U.S. Federal Reserve will change its pace of interest-rate hikes.

SGX

Total FX futures volume on SGX stood at 2.9 million contracts in February, up by 39 percent on a yearly basis. Hedging activity on SGX FX accelerated in February amid U.S. dollar weakness related to the outlook for rates.

The exchange said FX activity was also lifted by an outsized gain, partly because of fewer trading days in the year-ago period due to the Lunar New Year. The volume of USD/CNH Futures jumped 85 percent YoY in February to 1.5 million contracts, bolstering its position as the most widely traded international RMB futures. The CNH or offshore RMB is increasingly being adopted as a safe-haven currency amid heightened risk aversion.

INR/USD futures volume also increased 2 percent YoY to 1.2 million contracts, as the Indian rupee declined towards the second half of February.

Earlier in 2022, SGX FX has added non-deliverable forwards (NDFs) to its FX electronic communication network, SGX CurrencyNode, after being approved as a Recognised Market Operator (RMO) by the Monetary Authority of Singapore (MAS). Using a central prime brokerage model, SGX CurrencyNode currently streams liquidity for FX Spot, Precious Metals and NDFs, with plans to launch FX Swaps and NDF Spreads at a later date. BNP Paribas and Deutsche Bank are the central prime brokers for SGX CurrencyNode.

On SGX Equity Derivatives, the SGX FTSE China A50 Index Futures remained the world’s most liquid international futures for Chinese equities as market share by open interest grew further in February. Traded volume of the contract rose 5 percent YoY to 7.5 million contracts, up 1 percent MoM.

The exchange said investors are pouring money into vehicles that track Chinese assets, betting that the long-awaited reopening of the world’s second-largest economy will keep powering markets higher.

Meanwhile, total derivatives traded volume rose 7 percent year-on-year in February to about 20 million contracts, the highest in three months. Benchmark contracts on SGX Commodities continued to serve as a macro proxy amid signs of China’s economic recovery.

On SGX Fixed Income, Asia’s leading international bond marketplace, the amount issued from 149 new bond listings – the most since July 2022 – climbed to S$34.1 billion in February.

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