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SGX may benefit from surging derivatives trading activity amid market turmoil, tougher regulation

Jeffrey Tan
Jeffrey Tan2/15/2019 3:30 AM GMT+08  • 8 min read
SGX may benefit from surging derivatives trading activity amid market turmoil, tougher regulation
SINGAPORE (Feb 11): Global equity markets ended 2018 on a decidedly sour note. Once high-flying technology stocks were heavily sold off, and volatility across equity markets spiked, especially in October. The key reason was that the US Federal Reserve’s
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SINGAPORE (Feb 11): Global equity markets ended 2018 on a decidedly sour note. Once high-flying technology stocks were heavily sold off, and volatility across equity markets spiked, especially in October. The key reason was that the US Federal Reserve’s hawkishness was looking increasingly out of step with emerging signs that growth was slowing. The Fed has since adjusted its rhetoric, and the nervousness has subsided. But analysts are bracing for tougher and more volatile months ahead.

This is a very favourable backdrop for derivative instruments, as hedging activity is likely to increase. “When you’ve got increased volatility in the market — the underlying market, which is the equity market or interest rate market — people tend to hedge more,” says Andrew Gilder, EY Asia-Pacific banking and capital market leader.

Uncertainty over the future direction of global equity markets is also contributing to increased trading in derivative instruments, says Conrad Huber, head of trading solutions advisory and sales at Credit Suisse Private Banking Asia-Pacific. “If people don’t know where the market will go, this is one way to park your money, [and at the same time] hedge your returns. This is especially given the geopolitical uncertainty.”

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