Singapore Exchange (SGX)

[CityFarmer]

Yea SGX only makes sure the trades settle as a clearing house, not the counterparty

But there is certain counterparty risk in derivatives because it is on margin. IIRC there now exist an exchange fund for that purpose. ahyu you can read up on Barings Nick Leeson case for more understanding of the mechanism involved and safeguards.

Nick Leeson brought down Barings Bank, instead of the exchanges of his trades.

[specuvestor]

yes and I wasn't insinuating otherwise... but if you are able to recall... there was initial worry on Simex exposure until even MAS came in to clarify the margins that were pledged. Hence the birth of the Exchange Fund I think.

So THEORETICALLY there is counterparty risk due to margins. Not as straightforward as a DVP stock trade

[CityFarmer]

yes and I wasn't insinuating otherwise... but if you are able to recall... there was initial worry on Simex exposure until even MAS came in to clarify the margins that were pledged. Hence the birth of the Exchange Fund I think.

So THEORETICALLY there is counterparty risk due to margins. Not as straightforward as a DVP stock trade

Granted. IIRC, there is similar fund for equity market as well.

The conclusion is, there is a counter-party risk due to margin, but the risk isn't high even for major case as Nick Leeson/Barings. Of course, if all go with the rules.

[specuvestor]

Interesting... maybe more Yuan listings

Nov. 27 (Bloomberg) -- China supports companies in the
planned 30-square km Tianjin “eco-city” zone to list in
Singapore, which is a partner of the zone project, according to
plan on China NDRC’s website.
* Zone banks will be supported in extending overseas yuan
loans
* The zone will use Shanghai free-trade zone as a model for
investment requirements: statement
* Qualified real estate cos. can use REITs to raise funds in
Singapore for environment-friendly projects in the zone:
statement

[CityFarmer]

The fist yuan listing of YZJ, has very low tradings. I reckon no further yuan listing in SGX in near future...

Interesting... maybe more Yuan listings

Nov. 27 (Bloomberg) -- China supports companies in the
planned 30-square km Tianjin “eco-city” zone to list in
Singapore, which is a partner of the zone project, according to
plan on China NDRC’s website.
* Zone banks will be supported in extending overseas yuan
loans
* The zone will use Shanghai free-trade zone as a model for
investment requirements: statement
* Qualified real estate cos. can use REITs to raise funds in
Singapore for environment-friendly projects in the zone:
statement

[specuvestor]

YZJ is a test pilot It is expected to be illiquid until RMB settlement is more widely acceptable for investors

The HKEX through train effectively is trying to bridge this gap. You can settle in RMB or HKD through the broker. In time to come more people will be settling in RMB for A-shares through train.

[CityFarmer]

YZJ is a test pilot It is expected to be illiquid until RMB settlement is more widely acceptable for investors

The HKEX through train effectively is trying to bridge this gap. You can settle in RMB or HKD through the broker. In time to come more people will be settling in RMB for A-shares through train.

The YZJ RMB is an indicator for the acceptance of RMB settlement in SGX, as far as I am concern.

For the through train, I am yet to find out the acceptance of RMB settlement of Northbound transaction. Do you have any indicative number?

It is a good news to me, if the acceptance of RMB settlement pick-up in SGX.

[greengiraffe]

Strange,I also thought Singapore Bonds are inactive but the following article seemed to think otherwise

Investors underwhelmed by easier bond trading
PRASHANT MEHRA THE AUSTRALIAN NOVEMBER 28, 2014 12:00AM


There has been relatively little trading of listed Australian government bonds since the rules were changed Source: News Corp Australia

A MOVE in Australia to provide retail investor access to fixed income assets has failed to take off, 18 months after the ASX started trading in listed Australian government bonds, as low interest rates and lack of depth in the market keep small investors away.

The stock exchange worked with the government to start trading in listed AGBs in May 2013, giving individual investors more opportunity to buy assets that offered a fixed return and the chance to diversify away from equities-heavy portfolios.

The move was also expected to be the first step in spurring Australia’s nascent corporate bond market, allowing companies an alternative source of finance to bank loans.

AGBs worth $2.4 million were traded in June 2013, the first full month of trading. Retail volumes were expected to increase rapidly in an overall AGB market worth $150 billion a year, but monthly trading value has hovered around $5m so far this year.

“There really hasn’t been much activity in that segment and the volume of trading reflects that,” said Craig Swanger, head of markets at fixed income investment manager FIIG Securities. “Retail doesn’t buy because the yields are too low, and institutional buyers deal directly in the wholesale market.”

Australia’s benchmark interest rate has been on hold at 2.5 per cent since August last year as the Reserve Bank looks to boost flagging growth and consumer sentiment. The rate is expected to remain at these levels until the middle of next year.

Investors can find better returns in term deposits compared to investing in long-term government bonds that typically have yields between 2.5 per cent and 3.5 per cent.

Across the world, government bond trading on stock exchanges has shown mixed results. On the New York Stock Exchange, for instance, government bonds are among the most poorly traded.

Comparatively, exchanges in Singapore and South Korea have seen a meaningful amount of trading in government bonds, but analysts attribute this to the fact that banks rates in these countries hover close to zero.

The ASX market in listed government bonds was primarily targeted at the growing segment of individual investors who held their retirement savings in self-managed super funds. Experts have long called for super funds to diversify their portfolios.

Earlier this year, Credit Suisse estimated SMSF members on average have 43 per cent of their assets invested in equities, 24 per cent in property and 28 per cent in cash. It also highlighted the need to diversify into fixed income assets that provide regular returns.

Fixed-income brokers estimate there has been a doubling of retail interest in bond investments over the past two years. While much has been from SMSFs, concerns over inflated property prices and volatility in stockmarkets have also contributed to the change in approach.

But individuals had bypassed the retail traded bond segment and were directly investing in the wholesale market through funds, brokers said. The wholesale bond market previously required investments in parcels of $500,000, but over the past few years intermediaries have brought down the parcel size to as low as $10,000, opening up the market to individual investors.

Despite low trading volumes, analysts and fund managers continue to bet on the future of the traded bonds segment.

“Self-managed funds, particularly, tend to have underrepresentation of fixed income, which becomes problematic when you need diversification,” said Bill Bovingdon, chief investment officer at Altius Asset Management.

“From that perspective, it is positive that there is access to ASX-traded commonwealth bonds for retail investors.”

Listing corporate bonds, which yield higher returns, would be an important step in increasing retail participation and providing more liquidity in the bond market. That move is on hold as the government works on legislation that will allow easier listing of corporate bonds on the ASX, but is expected to start in the new year.

With many experts believing that interest rates have bottomed out, retail interest is also expected to bounce back once rates start to increase. “It will have its time, once rates go up. Once returns turn higher than bank deposits, we should see investors getting back into retail bond market,” said FIIG’s Swanger.

[weijian]

IMHO what is more contentious is the CLOB issue because SGX was clearing trades that Malaysia claimed to be quasi-"illegal" to set up an offshore bourse. When CLOB collapsed SGX denied any responsibility. The devil as always is in the detail

I was still in school uniform during CLOB time. So, I did some search on history and found that it was triggered because CLOB seemed to clash against Dr M's capital control policies. More importantly, there arosed alot of distrust between the countries as Msia believed that foreigners were borrowing CLOB shares to further short them.

I find it eerily similar to the VIE structure that all US listed Chinese firms are using right now. VIE is considered a grey area for the Communist Party but I suspect the "inner demons" will only be surfaced out in times of trial and testing. While there are similarities above, do note that US-China vs Msia-Spore power dynamics are entirely different. It does take a big ugly black swan for richest guy in town to want to clash with the sheriff.

[specuvestor]

^^ there has always been bad blood between Dr M and LKY, which IMHO stems from Dr M trying to outdo LKY in legacy.

If you read LKY memoir the real underlying reason was Singapore refused to extend USD loan to Malaysia and refused to internationalise the SGD as an ASEAN currency. Makes sense to me

YZJ is a test pilot It is expected to be illiquid until RMB settlement is more widely acceptable for investors

The HKEX through train effectively is trying to bridge this gap. You can settle in RMB or HKD through the broker. In time to come more people will be settling in RMB for A-shares through train.

The YZJ RMB is an indicator for the acceptance of RMB settlement in SGX, as far as I am concern.

For the through train, I am yet to find out the acceptance of RMB settlement of Northbound transaction. Do you have any indicative number?

It is a good news to me, if the acceptance of RMB settlement pick-up in SGX.

Settlement in HKD or RMB is what the chinese broker briefed me. I havent tried it.

Anyway offshore RMB acceptance whether in trade or stock settlement will always start from HK. Singapore can only play second fiddle. By the time RMB settlement in Singapore is prevalent ie comparable to our USD settlement (to put in right context and comparison) which is also pathetic, RMB is already very internationalise