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SGX faces threat from HKEX China share move

Bloomberg Published on Tue, Mar 12, 2019 / 3:19 PM GMT+8

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(Mar 12): 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.

Hong Kong Exchanges & Clearing announced on Monday it signed an agreement with index provider MSCI to start trading Chinese equity futures, laying the groundwork for another avenue through which global investors can hedge exposure to China’s US$7 trillion (US$ 9.5 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 analysts led by Robert Kong, who downgraded SGX shares to a sell from neutral.