Global Market: Singapore's US stock trading push struggles to attract investors
Singapore’s attempt to boost US stock trading during Asian hours has seen subdued volumes, highlighting challenges from competing products, limited investor familiarity and growing efforts to enable round-the-clock access to US equities.
By Anupam Nagar, ETMarkets.com |
Agencies
Singapore’s push to bring US stocks into Asian trading hours faces a slow start as investor participation remains limited.
Singapore's bid to bring trading in US stocks to Asian hours has made a slow start, with competing products and cautious investors keeping volumes subdued and highlighting the challenges regional exchanges face in capturing demand for round-the-clock US equity trading.
The Singapore Exchange launched its first three US stocks under its Singapore Depository Receipts (SDR) programme in July. The initial offerings covered Grab, Sea Ltd and SpaceX, with the shares traded in Singapore dollars during local market hours.
Read more: Global Market: Yuan slips as PBOC signals caution on currency appreciation
According to Reuters calculations, only about $2.3 million worth of SpaceX SDRs had changed hands through September 18. That compares with roughly S$2 billion ($1.6 billion) in average daily turnover on SGX and about $336.6 billion of SpaceX shares traded on Nasdaq during the same period.
Trading in SpaceX SDRs in Singapore represented just 0.0007% of the total trading volume of the company's shares in the US over the corresponding period.
Grab and Sea SDRs together recorded around $24 million in trading during the period, compared with about $26 billion worth of the stocks traded in the US.
Read more: Global Market: South Korean stocks pare gains as investors turn cautious ahead of Chuseok break
Singapore seeks to strengthen equities market
The SDR programme, first introduced by SGX in 2023, forms part of Singapore's broader efforts to deepen its equities market, which has historically lagged behind the city-state's prominence as a major Asian financial centre.
SGX has said its SDR listings are designed to give investors access to global companies during Asian trading hours rather than directly replicate the trading volumes of the stocks in their home markets.
The exchange currently has 38 SDR listings, including companies from Thailand, Indonesia and Hong Kong.
However, limited activity in the latest US stock listings illustrates the difficulty Singapore and other regional exchanges face as global financial markets move towards longer, and potentially around-the-clock trading.
Chris Forbes, head of Asia and Middle East at CMC Markets in Singapore, described the initial rollout as disappointing and said investors already have access to alternative products.
Global race for 24-hour US trading
Strong global demand for US equities has prompted brokers, exchanges and cryptocurrency companies to develop derivatives and other products that provide exposure to US stocks outside traditional market hours.
Nasdaq and NYSE Arca are preparing to launch a 24-hour trading programme on December 6, while the London Stock Exchange expects to introduce its own extended-hours offering in the first half of next year.
The developments could increase competitive pressure on regional exchanges seeking to attract investors interested in trading US stocks during Asian hours.
Grab and Sea declined to comment on their SDRs, while SpaceX did not respond to requests for comment. The companies were not directly involved in the SDR launches.
Familiarity remains a hurdle
Phillip Securities managing director Luke Lim, whose brokerage is the issuer designated by SGX to create SDRs by holding the underlying shares in trust and selling the local units to investors, expects to launch additional SDRs.
Carmen Lee, head of equity research at OCBC, told Reuters that investors in Singapore tend to be more familiar with companies that are directly listed locally.
She also noted that SDRs are not constituents of major benchmarks such as the Straits Times Index or MSCI indexes, which may limit their visibility among investors.
The early trading figures therefore point to a key challenge for Singapore's SDR initiative: providing access to globally popular US stocks does not necessarily translate into significant local liquidity, particularly when investors can already obtain exposure through a growing range of alternative products and trading venues.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
The Singapore Exchange launched its first three US stocks under its Singapore Depository Receipts (SDR) programme in July. The initial offerings covered Grab, Sea Ltd and SpaceX, with the shares traded in Singapore dollars during local market hours.
Read more: Global Market: Yuan slips as PBOC signals caution on currency appreciation
According to Reuters calculations, only about $2.3 million worth of SpaceX SDRs had changed hands through September 18. That compares with roughly S$2 billion ($1.6 billion) in average daily turnover on SGX and about $336.6 billion of SpaceX shares traded on Nasdaq during the same period.
Trading in SpaceX SDRs in Singapore represented just 0.0007% of the total trading volume of the company's shares in the US over the corresponding period.
Grab and Sea SDRs together recorded around $24 million in trading during the period, compared with about $26 billion worth of the stocks traded in the US.
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Read more: Global Market: South Korean stocks pare gains as investors turn cautious ahead of Chuseok break
Singapore seeks to strengthen equities market
The SDR programme, first introduced by SGX in 2023, forms part of Singapore's broader efforts to deepen its equities market, which has historically lagged behind the city-state's prominence as a major Asian financial centre.
SGX has said its SDR listings are designed to give investors access to global companies during Asian trading hours rather than directly replicate the trading volumes of the stocks in their home markets.
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The exchange currently has 38 SDR listings, including companies from Thailand, Indonesia and Hong Kong.
However, limited activity in the latest US stock listings illustrates the difficulty Singapore and other regional exchanges face as global financial markets move towards longer, and potentially around-the-clock trading.
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Chris Forbes, head of Asia and Middle East at CMC Markets in Singapore, described the initial rollout as disappointing and said investors already have access to alternative products.
Global race for 24-hour US trading
Strong global demand for US equities has prompted brokers, exchanges and cryptocurrency companies to develop derivatives and other products that provide exposure to US stocks outside traditional market hours.
Nasdaq and NYSE Arca are preparing to launch a 24-hour trading programme on December 6, while the London Stock Exchange expects to introduce its own extended-hours offering in the first half of next year.
The developments could increase competitive pressure on regional exchanges seeking to attract investors interested in trading US stocks during Asian hours.
Grab and Sea declined to comment on their SDRs, while SpaceX did not respond to requests for comment. The companies were not directly involved in the SDR launches.
Familiarity remains a hurdle
Phillip Securities managing director Luke Lim, whose brokerage is the issuer designated by SGX to create SDRs by holding the underlying shares in trust and selling the local units to investors, expects to launch additional SDRs.
Carmen Lee, head of equity research at OCBC, told Reuters that investors in Singapore tend to be more familiar with companies that are directly listed locally.
She also noted that SDRs are not constituents of major benchmarks such as the Straits Times Index or MSCI indexes, which may limit their visibility among investors.
The early trading figures therefore point to a key challenge for Singapore's SDR initiative: providing access to globally popular US stocks does not necessarily translate into significant local liquidity, particularly when investors can already obtain exposure through a growing range of alternative products and trading venues.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
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