Singapore: STI Index (.STI) Exchange Has New Challenge From HKEX China Share Move
Moves by Hong Kong’s stock exchange to start trading derivatives contracts based on Chinese-listed shares pose a new competitive threat to rival Singapore Exchange Ltd.
Hong Kong Exchanges & Clearing Ltd. announced on Monday it signed an agreement with index provider MSCI Inc. to start trading Chinese equity futures, laying the groundwork for another avenue through which global investors can hedge exposure to China’s $7 trillion stock market. The HKEX plans are subject to regulatory approval.
When trading starts, it will end SGX’s effective monopoly on offshore derivatives based on Chinese A shares which it has held since trading in its FTSE China A50 contract started in 2006. That will be a challenge for a derivatives contract which has been an important driver of SGX’s growth in recent years, according to Citigroup Inc. analysts led by Robert Kong, who downgraded SGX shares to a sell from neutral.
“We welcome steps to support China’s internationalization and increasing investor access to Asia’s most important emerging market,” SGX said in a statement. “SGX market participants will benefit from an even larger liquidity pool for our suite of China equity derivatives, as the interaction of different trading venues will create more flows.”
Though the timing of HKEX’s product launch has yet to be determined, as regulators in Hong Kong and China review the application, trading is expected to start within months rather than years, the Citigroup analysts said.
HKEX’s move could lead to a 15 percent decline in China A50 volumes over the next two years, according to Credit Suisse Group AG analysts, who said they don’t expect trading in Hong Kong to start until after November.
Krishna Guha, an analyst at Jefferies in Singapore, was more sanguine about SGX’s prospects.
“While we keep an eye on competing products, we are not overly concerned,” Guha said, adding that SGX has first-mover advantage in China futures contract offerings.
SGX shares fell 1.2 percent at 1:21 p.m. in Singapore on Tuesday, after dropping 3.7 percent on Monday. HKEX shares climbed 1.8 percent after rising 2.1 percent the previous day.
The FTSE A50 contract generated about 40 percent of SGX’s total derivatives volume in the last quarter. The futures have a daily turnover of $5 billion and notional open interest of $12 billion. An estimated $8 billion in exchange-traded funds are benchmarked to the index.
HKEX’s plans add to a series of challenges faced by the Singapore exchange, including a dearth of new listings and a dispute with the National Stock Exchange of India over the licensing of Nifty 50 Index futures and options contracts.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 3,277.48.
The projected lower bound is: 3,153.72.
The projected closing price is: 3,215.60.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 6 rising windows in the last 50 candles–this makes the current rising window even more bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 20.6155. This is not an overbought or oversold reading. The last signal was a buy 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.06. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 90 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -64. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 9 period(s) ago.
Rex Takasugi – TD Profile
STRAITS TIMES closed up 20.830 at 3,212.250. Volume was 11% below average (neutral) and Bollinger Bands were 36% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 3,222.01 3,196.18 3,193.32
Volatility: 12 12 15
Volume: 213,774,384 205,757,408 230,365,952
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
STRAITS TIMES gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
STRAITS TIMES is currently 0.6% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume out of .STI (mildly bearish). Our trend forecasting oscillators are currently bearish on .STI and have had this outlook for the last 7 periods.
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