SGX FTSE China A50 Index Futures (“SGX China A50 Futures”) traded a record monthly volume of 3.2 million contracts in July 2014. Average daily volume grew by 20% month-on-month to reach a high of 137,213 contracts or approximately US$945 million in notional turnover. The contract also set a one day open interest record of 444,354 contracts on 25th July 2014.
The FTSE China A50 index has rallied 5% since the beginning of this year amid optimism that the series of economic stimulus measures are starting to bear fruit. Official data showed that profit at industrial companies in China increased 17.9% in June from a year earlier. Both the Chinese government’s and HSBC/Markit’s manufacturing PMI numbers showed a jump to 51.7 in July, the fastest rate of expansion in over two years.
In June, SGX China A50 futures’ open interest gained 21% month on month to US$2.2 billion notional. Active participation from institutional clients like banks, proprietary trading firms, hedge funds and asset management companies brought about another 18% growth in open interest to US$2.6 billion in July. As of 4th August 2014, SGX China A50 futures’ open interest stood at 428,610 contracts or approximately US$3.2 billion notional.
“We saw the pick-up of interest in A-share starting early June. We had US$1.08bn of creation in July. The reasons behind are mainly the relatively cheap valuation of A share blue chip names and improved sentiment through continuous stimulus policies from the central government. We are heartened to see the combined growth of the SGX A50 futures and our ETF”, said Jack Wang, Managing Director and Head of Sales at CSOP Asset Management.
As of end July, there is approximately US$17 billion of ETF assets that are benchmarked against the FTSE China A50 Index, an estimated 8% increase from the previous month.
“We have seen heightened interest in the Chinese equity market in recent weeks and activity in the SGX China A50 futures market has picked up substantially. Given that China has one of the largest equity markets in the world with US$4 trillion in market capitalization, we believe there is still a lot of room for the SGX futures to grow”, said Alex Longman, Managing Director, Credit Suisse.