Why Singapore is likely to ease again ~ With depreciation risks likely to remain on the Singapore dollar, the Monetary Authority of Singapore will ease policy at its April meeting, says Sim Moh Siong, FX strategist at Bank of Singapore. ~ 22 Mar 2015
08 Apr 2015 13:38 CST DJ BMI Research Thinks Singapore May Ease Again -- Market Talk 0537 GMT [Dow Jones] BMI Research says the Monetary Authority of Singapore may ease its currency policy again amid lackluster economic growth prospects. The central bank may lower the centre of the undisclosed band in which it keeps the local dollar versus its trade-weighted peers when it reviews policy on April 14. "Singapore's economy is mired in a rough patch of mediocre economic growth and deflation. As a result of continued headwinds stemming both from domestic economic restructuring and poor external demand dynamics, we have lowered our 2015 real GDP growth forecast to 2.9% from 3.3% previously," BMI says. It notes that the two main reasons for Singapore's soft growth are the ongoing economic slowdown in China and the domestic economic restructuring process to move away from dependence on foreign labor.
“Maginot Mentality” a term that is a byword for leadership who takes comfort in the past, unable to recognize fundamental changes had taken place. On Feb 14th after its monetary policy review, the MAS announced the gradual appreciation of the S$ remained the “appropriate policy stance”. The writer wonders if policy-makers are afflicted by their own “Maginot Mentality” – overly comfortable with ultra low interest rates, unable to recognize that the ground had shifted. Given the S$ correlation to US interest rates, the MAS may well be fighting yesterday’s battles when the Federal Reserve eventually raise rates, thereby rendering MAS’s policy ineffective or even counter-productive.
MAS policy targets a gradual appreciation of the S$ Nominal Effective Exchange Rate (NEER) which represents the undisclosed trade weighted value of S$ in relation to Singapore’s main trading partners. It is meant that the NEER should be strong enough to control imported inflation, thus supporting economic growth. Until 10 years ago, targeting an appreciation of the NEER kept inflation in check. But things began to go awry from 2005 onwards.
The above chart shows the cumulative year by year increase in inflation (blue) and the cumulative appreciation of the S$ against trade weighted index as a proxy to NEER (red). You can see that inflation start to accelerate in 2007 but throughout the 10 year period, the NEER has appreciated almost in lock step with inflation. However, this should not be the case since the appreciation of the NEER is meant to curb inflation. In addition, since 2008 the 1 year deposit rate (green) flat lined close to 0.5% and the 10 year bond yield (grey) averaged 2.5%. By relying solely on NEER appreciation, MAS had produced negative real interest rates by mimicking the monetary conditions from the West despite the absence of their problems of low growth, high unemployment and potential deflation.
Why did the NEER appreciation failed to curb inflation? The answer is the FT policy which flooded the economy with foreign workers and the Profit Maximization Strategy which work hand in glove with the latter. Transport costs (Goods Vehicle and Bus COE +500%), real estate (Residential +89%, Industrial +138%) and rents (+52% last 4 years), among others, have driven inflation to an extent that any disinflationary benefit from the appreciation of the NEER has been overtaken. Negative real interest rates caused homebuyers to over-estimate affordability, developers to bid up land prices, businesses to over-expand, unproductive ones to thrive, banks lending too much and large companies to overpay for acquisitions. This created far greater demand for resources than the economy can cope. The present policies caused the Singapore economy to grow well above the rate it could naturally sustain, are inflationary and the root cause of unaffordable housing, high cost of living and poor returns on savings.
The NEER policy alone cannot curb these excesses as the link between the NEER and inflation may be irretrievably broken by present government policies. The writer suggests the MAS apply interest rate targeting to guide the economy along a sustainable growth path. In any case, the S$ will be weakened by higher US rates which would worsen inflation. This will force the MAS to raise interest rates belatedly when it should act preemptively to forestall risks.
The role of central banking had been famously described as “taking away the punch bowl just as the party gets going”, i.e. raise interest rates when growth is too strong in order to balance the risks and trade-offs in the economy. When interest rates overtake inflation, the unnatural speed of the economy will slow. Uncompetitive industries such as those on low productivity and addicted to labour inputs tend not to survive in such monetary conditions. The creative destruction improves the economy’s productivity by ridding it of excessive labor reliance and resource usage. Higher rates enforce discipline on pricing since cost of financing is no longer cheap. Citizens’ savings and CPF earn a real return and will not be sacrificed for low financing costs to the business and corporate sector.
Unfortunately, the MAS’ role is to support government policies, not to lean against economic risks and excesses by acting according to its own judgment on growth and inflation. However, monetary policy is too important to be left to politicians who by nature tend to favour one part of the electorate over another according to ideology.
It is for this reason that central banks, an indispensable check and balance in advanced countries, are free from political control. Singapore lacks such diligent niceties which stand in the way of the growth at all costs strategy. But the institutional lack of check and balance has heightened risks to economic stability due to inflation, elevated property prices, excessive bank lending, among others. An early rise in interest rates back in 2011-2012 would have lessened these risks. This is all the more ironic given the government’s “foresight” in “long term planning”.
* The writer has spend his entire career in managing balance sheet currency, interest rates and liquidity risks. As such, determining the direction of central bank monetary policy is a crucial element of his job.
Refining SGX's red flags to better alert investors
Cautionary statements backed by market surveillance help in making informed choices
By Goh Eng Yeow 14 Sep 2015
The Singapore Exchange (SGX) often stands accused of failing to act fast enoughto query companies hit by unusual trading activities, and accepting standard replies without trying to probe further.
To fend off such accusations, the SGX upped the ante last year, with a measure to issue a "trade with caution" (TWC) notification to remind investors to be careful when a company fails to come up with a satisfactory explanation when queried.
That was supposed to serve as a warning that the trading characteristics of a company's stock could be caused by market forces other than its corporate developments.
But the observation of this columnist is that such a notification should be used sparingly. Otherwise, it could lose its effectiveness.
The lack of reaction from the market to the fairly large number of TWCs issued has served only to reinforce this columnist's observation that the warnings have fallen largely on deaf ears.
Take, for example, Sino Construction - a loss-making S-chip in the construction and civil engineering sector - since renamed as MMP Resources.
Its share price stayed at a gravity-defying level last year, despite getting TWC labels slapped on it twice - in April and September.
The party came to an abrupt end only seven months ago when its share price halved in a single trading session, after it announced it was expecting a loss for last year and requested a month-long extension to release its financial results.
Looking back, this columnist can only wonder how many traders took the two TWC warnings issued by the SGX seriously and hopped off Sino Construction before it crashed.
Wielding the TWC red flag can sometimes be a tad awkward too.
The bourse operator found itself slapped with a TWC notification on July 2 after attracting a high turnover and a 5.62 per cent rise in share price the previous day.
It had said it was not aware of reasons behind the developments.
Such an action makes light of a weighty issue.
To put things in perspective, the TWC measure was introduced in the aftermath of the seemingly inexplicable crash of the trio - Asiasons Capital, Blumont Group and LionGold Corp - in October 2013, following their equally inexplicable rise which transformed them from penny stocks into counters worth billions of dollars.
That market calamity caused plenty of grief to retail investors as $8 billion in market value was wiped out in days.
Contra losses running to more than $100 million were also reported.
So let's face it, the TWC was not aimed at blue chips such as SGX, Jardine Cycle & Carriage or United Overseas Bank, all of which had been slapped with the label one time or another, but whose unusual trading activities could be explained in terms of broader market events, rather than specific corporate actions.
Rather, it is targeted at sudden price movements in illiquid counters which suddenly spring back to life after long hibernation.
Seen in this light, it is good to note that the SGX appears to have taken heed of the lessons learnt and come up with further refinements to the red flags it issues on trading activities that are out of the ordinary.
Last month, it took the unusual step of issuing a press release to urge investors to be cautious in dealing with shares of fuel trader CEFC, which it had earlier slapped with a TWC after its share price had skyrocketed by 16 times - from 2.5 cents to as high as 40.5 cents - in just one month.
SGX had noted that in July and August, as CEFC was doing a share placement issue, "buying volume was concentrated in a small number of offshore accounts".
Together, these accounts had made up more than 40 per cent of the total traded volume during the period, it added.
Prior to issuing the cautionary statement, it had also pressed CEFC for an updated shareholding list and this showed that the counter's shares were very tightly held.
Last week, the SGX issued a similar cautionary statement on healthcare service provider IHC whose share price, it noted, had stayed steady between 29 cents and 32 cents for the past five months, despite general market volatility.
It said: "SGX's review of the trades revealed that a handful of individuals who seemed to be connected to each other were trading IHC shares through various trading accounts among themselves."
The SGX also noted that the trades of these people had amounted to more than 60 per cent of the total traded volume of IHC shares in the past five months.
This columnist would like to laud SGX's decision to share the fruits of its market surveillance efforts on CEFC and IHC with the investing public.
This will enable them to make a better-informed decision on whether to invest, or stay invested, in the two counters.
Had similar steps been taken before the Asiasons, Blumont and LionGold stock fiasco, this might have prevented the grief and pain suffered by retail investors when these counters subsequently crashed.
Readers will recall that after the trio's plunge, United States stock trading firm Interactive Brokers accused eight of its clients of buying and selling large blocks of shares in the three counters "using the same accounts, often on the same day and at the same price to give the impression that the counters were actively traded".
Interactive Brokers also alleged that these clients, all of whom shared the same financial adviser, had accounted for the bulk of LionGold's and Asiasons' daily trades before they crashed.
Now, this columnist is not suggesting that there is any wrongdoing where the recent trading activities of CEFC and IHC shares are concerned.
But in the light of the cautionary messages put out by the SGX, surely traders should be asking themselves if there is any justification for them to be trading at such lofty levels?
That is how a caveat emptor stock regime is supposed to work: Buyers beware.
The formation of three independent Listing Committees by Singapore Exchange (SGX) will bolster market confidence in future company listings, the bourse operator says.
SGX’s listing process will be enhanced by the views offered by the Listings Advisory Committee (LAC), Listings Disciplinary Committee (LDC) and the Listings Appeals Committee (LApC). The three committees will come into force on Oct 7, in concert with amendments made to the SGX Listing Rules effective on the same date.
The committees comprise independent and experienced market professionals, whose appointments were made in consultation with the Monetary Authority of Singapore.
“The opportunity to chair the LAC is a chance to make a difference, to make a stronger and more transparent stock market here in Singapore,” says Blackstone Singapore’s chairman and senior managing director Gautam Banerjee, who chairs the LAC.
Banerjee told reporters at a media briefing that the LAC will act as an “independent check and balance” on SGX’s IPO process and that the LAC’s members will weigh in on the listing applications referred to them.
The referral criteria for cases submitted to the LAC include where novel or unprecedented issues are involved, specialist expertise is required, or matters of public interest are involved.
Meanwhile, the LDC and LApC will hear and determine charges and appeals for cases involving more serious breaches and entailing more severe sanctions.
DBS Bank’s senior executive adviser Eric Ang, who chairs the LDC, believes that the strengthening of regulatory enforcement will boost the competitiveness of SGX. “The formation of the LDC is timely,” he says.
The LApC’s chairman Francis Xavier says his committee will ensure “the due process is fulfilled” in providing an avenue for individuals or companies to appeal against disciplinary actions.
“In that way, we hope to provide a robust enforcement process,” says Xavier, who is also the regional head of dispute resolution at Rajah & Tann LLP.
I read with interest your BT article “Singapore market value down five months in a row” on Oct 1, 2015. It is worrying that despite all the IPO capital raising from 2012 to 2015, the Sept 30, 2015 closing market cap “was the lowest month-end reading since August 2012, when the total market was worth S$829.3 billion”.
There was also an earlier article headlined “Singapore firms’ IPO proceeds fall to lowest since 2009” (BT, Sept 22) which stated that capital raising for the first nine months of 2015 stood at US$91.7 million, which is also a 95.6 per cent slump compared to the first nine months of last year.
All this worrying news clearly shows that our Singapore market is in a dire state. It is not only a cyclical issue but a real structural problem.
We, from the broking community, had written a letter with 1,225 signatories, dated Jan 15, 2015, to our Deputy Prime Minister then-Finance Minister Tharman Shanmugaratnam about the state of our moribund market and made an earnest plea to rebuild much-needed confidence. We had made several recommendations which we truly believed would have brought back vibrancy to our markets. Sadly, most of our recommendations have not been implemented and our markets have gone from bad to worse since then.
Subsequent to our letter, we have had a couple of meetings with MAS but sadly, nothing much concrete has come out so far. One of the issues we highlighted several times was the Minimum Trading Price policy, which has destroyed a lot of investors’ wealth and undermined gravely the markets’ confidence.
If a policy has failed, we must have the courage to admit it and take corrective action. If we continue with these types of flawed policies, we will end up in a situation like the one we are in now. Also, more importantly, we need policy makers who must have at least some years of market experience who can then really understand what the market really needs. Theoretical knowledge is not sufficient.
Our market is now akin to being in an intensive care unit. We need urgent attention and care, otherwise we will be history.
The investors and broking community were looking forward to the new SGX CEO and hoping that it would be the dawn of a new and promising era for our markets. Three months have come and gone and the hope is fading rapidly and reinforcing the notion that nothing much of significance will be undertaken.
Granted, it is only three months but looking at the state of our markets, we should be cognisant that we do not have the luxury of time. Many investors have given up hope. Now, even the broking community is fast losing confidence.
I have been in the industry for 21 years and haven’t seen our markets in such a pathetic state for such a prolonged period. As a Singaporean, I feel really sad that we have left our markets in such a sorry state and that nothing much has been done for such a long time. Our SMEs are having a tough time raising capital through our markets. Our investment banking community is also suffering and our economy is drastically affected.
We, the investors and the broking community, need to have a serious pow-wow session with our new Finance Minister, Heng Swee Keat, and come up with real practical solutions to rebuild the much-needed confidence of our markets.
I sincerely hope Mr Heng, together with the investors and the broking community, will re-establish the Singapore market as a top Asian gateway which Singaporeans will be proud of.
Challenges of the Singapore stock-broking industry
By Edward Meow 9 Jun 2015
Recently, The Economist highlights an important trend that all in the financial services industry must take note if they expect to be around in even five years - the use of technology in the industry. In the local stock broking context, the invasion of borderless internet trading platforms would count as one. Besides the technology threat, there are also other challenges our local stock broking industry faces. I will surmise each of them as below:
1. Competition from non-SGX member internet trading platforms
Our local stock-broking houses were slow in reacting to the threats posed by such foreign internet trading platforms who are not SGX members. Not only are these foreign internet platforms packed with features that our local stock-broking houses do not have, they also charge lower commission rates. It is only in the last few years that member stock-broking houses are spending money on improving their trading platform capabilities, whereas these competitive internet trading platforms had capabilities like stop-loss, trailing stop-loss etc, a decade ago. Furthermore, users can also trade soft & hard commodities, indices, forex, CFD, options - all on one platform. If they have to choose, our younger tech-savyy investors will likely choose such a more capable trading platform. Advisory trading (phone calling your stock-broker) will be used by the older generation who are less tech-savvy, and those who are too busy to key in their own trades. Over time, if our member stock broking houses do not "catch-up" on improving their trading platform to be on par, or even surpass that of these competitive trading platforms, we will all (both member stock-broking houses and their remisiers) lose out. The only solution has to be a holistic one involving all stakeholders of the industry - the SGX, the Government and the investors, both institutional and retail.
So, what should be the position of SGX, MAS and SIAS with regards to such non-SGX member internet trading platforms? It is a difficult position that SGX has, in that it cannot be seen to be stifling Singapore as a financial centre. With the current internet-age, it would indeed be a challenge and near impossible for SGX to keep out such internet trading platforms. The most effective way would be for SGX to work together with member broking houses to introduce trading platforms with better capabilities, and with more products like stock options & indices, and perhaps even commodities and forex. This will make their trading platforms more interesting to local investors and not lose out to the foreign competition. With trading platforms of better capabilities, member broking houses can, and should, compete for international business from other countries, just like what these alternative internet trading platforms are doing in Singapore. This will then ensure the survival of, especially, the local stock broking houses.
Regardless of the fact that we want to make Singapore a vibrant regional financial hub, it is important for MAS to ensure sufficient policing so that our Singaporean investors do not fall into any scams by rogue internet trading platforms. For the retail investors, SIAS needs to move beyond its role as champion to do some due diligence and intelligence work to sieve out and warn retail investors of any potential rogue internet trading platforms.
2. Singapore stock market vs Foreign stock market
If you are trading in the US market, you would have noticed the flurry of activity in this market. There is no denying that the dynamism of foreign markets, like the US, or HK (which has the hinterland support of China), surpasses our Singapore market. With due respect to the Singapore companies listed on SGX, it is sad to say that none of these companies show the promise of innovation that US companies can. Singapore companies only grow organically or geographically, but none like the types of Apple or Microsoft, or recently Tesla, where their stock prices can grow multi-fold due to the value-added of their product innovation. Take Apple for example. During May/June 2007, it was about USD80. It then grew to nearly USD700 in June 2014. In June 2014, it exercised a stock-split of 1 into 7, which brought it to just above USD90. It has now gone up to about USD129. That is a 9 fold increase over a period of 8 years. Clients finding the Singapore market less exciting, are gradually moving to foreign markets, but unfortunately, with more of them slowly shifting to the use of the more capable foreign internet trading platforms mentioned above.
SGX cannot depend on the local stock investing community to attract premium companies to list in Singapore as this community is too small to have any impact. It has to find ways to make the Singapore listed companies accessible to a bigger population of investors worldwide, and not just within Singapore. With a bigger net cast, hopefully there will be more vibrancy, and therefore will attract better quality corporate listings. Otherwise, we will end up in a vicious cycle of low vibrancy, and therefore lower quality corporate listing, and vice-versa. The current initiative by SGX to link up with Taiwan, Japan, and rumoured talks of link up with the Chinese Exchanges, should hopefully move us in this positive direction.
3. Competition of brokerage fees from foreign markets
Brokerage fees in USA are generally lower than ours, and in some cases are fixed ($) on a per trade basis. This encourages big volume trading unlike percentage (%) based brokerage that is the norm in Singapore, where the higher the volume traded, higher is the brokerage cost. But of course, Singapore being a smaller market, it would be unwise for us to follow a fixed value ($) brokerage system as this will lead to lower revenue for the local broking fraternity. Nonetheless, the US brokerage system will certainly attract Singapore investors away from our local market which is seen as less dynamic and with less potential "multi-bagger" stocks. This shift is further aided by the borderless foreign internet trading platforms, together with their lower commission rate. Such a self-perpetuating situation will become worse, unless we break the vicious cycle of low vibrancy as stated in point 2 above. However, our top priority now should not be to implement a similar type of brokerage system as the USA. Only after we are able to attract more transaction volume into our Stock Echange should we then be able to consider fixed value ($) brokerage system.
4. Unhealthy competition between local broking houses
While in the past, the fixed 1% brokerage fee was seen as unduly high, the current, supposedly, market dynamics of competitive brokerage fees is certainly unhealthy for the industry. Local broking houses and remisiers undercut each other. In the end, everybody loses. Revenue for the brokerage houses and remisiers is reduced. Demanding small clients may not get the service they want if the motivation of a remisier is to balance the time he has to spend on such clients versus the returns. The competition is not only between the broking houses, but sometimes also amongst remisiers of the same broking house. This can happen during roadshows, where a client may not reveal immediately that they already have a broker with the same broking house. In order to gain business, the remisier at the roadshow may unwittingly promise a lower commission, thus causing much unhappiness with the client who may think that his/her current broker has not been honest. Most clients expect their brokers to give them the lowest commission rate out-right, not knowing that they may have to meet certain volume criteria before such a low rate can be granted. For the local broking industry to survive, this kind of unhealthy competition has to stop. All stakeholders have to sit down and thrash out a scheme of fixed brokerage rate (%) that is fair to both investors and the stock-brokers. This should certainly not be seen as price-fixing as there are precedents in other cases/industries.
The Singapore stock broking industry is certainly facing many challenges. I would not venture to say that the industry has to innovate or reinvent itself, but rather it is downright very practical things that has to be done by the various responsible parties. Instead of working independently within their narrow scope of self-interest, all concerned parties have to work in consultation and in synergy of each other. If all parties are not united in the objective of improving the situation, the ultimate loser will be the Singapore stock-broking industry and its prominence in Asia, or even in S.E. Asia. China (together with Hong Kong) is already coming up very fast. Indonesia, with a domestic base of 260 million people, can outdo us in S.E. Asia if they put their act together better than us.
SGX has to push and take the lead in all the actions below:
i) Member (especially the local ones) stock broking houses has to invest on improving on the capabilities of their internet trading platforms to ensure that the tech-savvy younger generation investors do not move away to the more attractive non-SGX member foreign internet trading platforms. With their improved trading platforms, the local broking houses should then explore the possibility of attracting overseas investors to trade in the SIngapore stock market.
ii) SGX should explore to include more products that can be traded via the member broking houses' trading platform, e.g. stock options, indices, and possibly commodities futures and forex.
iii) SGX has to work hard on improving the vibrancy of our Singapore stock market through links with other regional and foreign stock exchanges. SGX and the member stock broking houses should also work towards making it easy and simple for overseas investors to trade in our Singapore stocks.
iv) All stakeholders should sit down to thrash out a fixed brokerage (%) scheme which would be fair to both investors and stock-brokers, and which would prevent the unhealthy undercutting. The value-add of remisiers has to be recognised as they not only act as "no basic salary" sales-force, but also bear complete risk of the clients that they acquired. Although there are efforts by some broking houses to introduce cash-deposit trading, a lot of clients still prefer to keep money in their own hands. The contra-players would also not see the advantage of depositing their money with the broking houses. In large countries like China or the USA, it may perhaps make sense to have cash-deposit trading as the population mobility is high, and the risk of bad-debts from open-credit trading in a large continent will be too high, but not in Singapore. The undercutting of commission resulted in very thin commission that has to be shared 60:40 between broking house and remisier respectively. This does not commensurate with the financial resources that the broking house needs for rentals, backroom support, trading platform improvements etc.It also does not commensurate with the high risk that remisiers have to bear in terms of bad-debts. We should unite to gain back our share lost to external forces, but sadly it seems that we are competing even more amongst ourselves for the slowly shrinking piece of cake taken away by such external forces.
NB: The opinion expressed here is the personal opinion of the author, and any mistake made is solely that of the author, and not that of the SRS or its Ex-Co.
MAS eases slightly on Singapore dollar in 2nd adjustment this year to support growth
By Marissa Lee 14 Oct 2015
The central bank is slowing the rate of appreciation of the Singapore dollar for the second time this year to support flagging economic growth.
The Monetary Authority of Singapore (MAS), which uses the currency rather than interest rates to guide the economy, said in a statement on Wednesday it will reduce the slope of its currency band, to "slightly" reduce the rate at which the Singapore dollar is allowed to appreciate.
A weaker Singdollar helps the economy by making exports cheaper.
The easing as MAS' scheduled bi-annual meeting was in line with market expectations - 16 of 25 private sector economists in a Bloomberg poll had expected the central bank to ease.
MAS called its decision a "measured adjustment" to expectations that Singapore's economy will now grow "slightly weaker than earlier envisaged."
The economy avoided a technical recession in the third quarter, expanding 0.1 per cent from the previous three months, when it shrank a revised 2.5 per cent, advance estimates out also on Wednesday showed.
Said MAS: "The overall outlook for the global economy has softened compared to the review in April. While the United States economy is likely to expand at a stronger pace on robust private consumption, its import demand has been weak. In the Eurozone and Japan, the pickup in economic activity is envisaged to be gradual. China's growth momentum is easing on a sharp deceleration in investment growth.
"Taken together, these factors will weigh on the region's commodity producers and trade-dependent economies. As a consequence, the growth outlook for Asia ex-Japan as a whole has dimmed."
On Jan 28, the central bank surprised by easing exchange rate policy at an unscheduled meeting, after downgrading its inflation forecast. In April, at its last biannual policy review, MAS held firm.
The exchange rate that MAS targets is trade weighted such that the currencies of Singapore's larger trading partners bear more weight. This trade-weighted exchange rate is known as the Singapore dollar nominal effective exchange rate or S$NEER.
MAS said on Wednesday that S$NEER "had weakened and largely fluctuated in the lower half of the policy band" since July, reflecting "renewed expectations of US monetary policy tightening and a rise in global risk aversion, mainly stemming from fears of a more significant downturn in China and other emerging market economies."
"External sources of inflation are likely to stay generally benign, given ample supply buffers in the major commodity markets and weak global demand conditions," it added.
Standard Chartered economist Jeff Ng said: "We note that MAS's outlook on inflation is now lower near-term, which may have been a factor in the decision. MAS only expects inflation at 0.5 per cent this year, from 0.5-1.5 per cent prior."
Investors are turning to derivatives and foreign exchange trading in a big way, with a surge in the number of traders and deals being struck.
There were 24,500 traders involved in forex deals and contracts for difference (CFD) - a complex derivatives product - in the 12 months to August, a 21 per cent rise on the 20,200 in the same period a year ago.
The jump in trader numbers made Singapore the leader among seven markets in an annual survey released by market research specialist Investment Trends yesterday.
Forex trading led the way, with the number of traders increasing from 13,000 in September last year to 15,000 in August this year. That is the first increase since the report began in 2010.
One reason behind the increase could be the move in January by the Swiss central bank to remove the cap on the franc's exchange rate against the euro. The report found 9 per cent of forex traders here say the event was a catalyst that got them started on currency trading, while only 6 per cent of French forex traders and 2 per cent of German ones cited it as a reason.
Dr Irene Guiamatsia, senior analyst at Investment Trends, said the rise in forex and CFD traders was a much-needed boost for an industry in steady decline for several years.
IG Singapore head Tony Lim said CFDs are a flexible way to trade in the financial markets as traders can either go long or short on a wide range of products, including forex, shares and commodities.
Mr Dickson Woon, senior forex manager at Phillip Futures, said investors find forex trading more appealing as they can start investing with lower capital, particularly because of the smaller contract sizes of products he refers to as "mini forex".
The report found an estimated 21,000 investors - up from 17,000 last year - plan to start trading either CFDs or forex over the next year.
Mr Karol Piovarcsy, Saxo Capital Markets' regional head of private client trading, noted that low interest rates and a relatively lacklustre local stock market are motivating investors to trade more in short-term trends. "The increased volatility in the third quarter ... created an attractive environment for shorting emerging stocks as well as emerging currencies," he added.
The ease of mobile trading could also be another contributing factor.
The report found that 89 per cent of traders here used a mobile device when trading CFDs or forex, ahead of the 76 per cent level in Britain as at July and the 69 per cent in Germany and France as at April.
Mr Piovarcsy said sophisticated investors tend to seek destinations like Singapore, "due to its structurally sound, transparent and tight monetary regulations and consumer safeguards".
CMC Singapore head Jason Hughes said: "Singaporean traders had the foresight to recognise that volatile and falling markets offer trading opportunities to capitalise on. Traders here are very clear-sighted, however much haze we sometimes have to deal with."
ICAP’s EBS BrokerTec and SGX to launch SGX-listed FX block futures
By Amy Tan 19 Nov 2015
EBS BrokerTec, ICAP’s electronic foreign exchange (FX) and fixed income business, and Singapore Exchange (SGX) have signed a definitive agreement to launch SGX-listed FX block futures on EBS BrokerTec’s FX central limit order book (CLOB), EBS Market, a primary venue for e-traded currencies.
The collaboration between EBS BrokerTec and SGX announced in January will bridge the FX over-the-counter (OTC) and futures markets.
The agreement announced today will enable market participants to seamlessly access an enhanced liquidity pool for trading Asian Spot, NDF and Futures insturments via the EBS Market.
The listed FX block futures will be available on EBS Market in early 2Q2016 pending regulatory approval.
The initial offering will include SGX block futures in INR, KRW, CNH, SGD and CNY.
Trades will be cleared through SGX’s next generation trade registration system, Titan OTC.
EBS BrokerTec’s direct connectivity into Titan OTC will provide customers with automated straight-through-processing for trades matched electronically on EBS Market and SGX’s central clearing will provide increased capital efficiency.
This is the first initiative that EBS BrokerTec and SGX is bringing to the market, as part of a long-term strategic partnership.
Shares in SGX closed 0.53% lower at $7.57 on Nov 18.