On February 9, Singapore Exchange (SGX) launched a new contract – MSCI Malaysia Index Futures and registered first day turnover of US$ 8 million. Trading activity was vibrant and came from diversified international participants such as Credit Suisse and Macquarie.
Southeast Asia is one of the most rapidly-growing economic regions in the world. The growth for this year is estimated at 6.4 per cent while financial markets have been accelerating with increasing demands driven by more diversified products covering various sectors.
Over years, investors have been focusing in the participation of Asean regional growth through derivatives products. Apart from this, agriculture businesses are well spread in this mostly tropical part of the earth with soft commodities sold to the worldwide markets. Currently, global traders may participate in FKLI listed in Bursa Malaysia or have another choice in SGX MSCI Malaysia Index Futures in Singapore Exchange. The liquidity spill over these two markets will eventually help the Malaysia equity and derivatives markets advance better into deeper exposure when foreigners wish to engage a position in Malaysia economy.
The SGX MSCI Malaysia Index Futures contract is denominated in US dollar with a multiplier of US$ 20. The trading hours are longer than FKLI trading in Malaysia, operating from 8.30am to 5.30pm on market day.
The T+1 session will start from 6.30pm to 2am on the following day.
However, the overlapping trading hours of SGX MSCI Malaysia Index Futures with the Malaysian cash market allows for continuous price discovery among global investors. Effectively speaking, the T+1 trading session enables investors to adjust intra-day position before market re-opens on following day.
Besides taking a stance in hedging or speculation, we believe the rising opportunity in arbitrage between FKLI and SGX MSCI Malaysia Index Futures will create a streamline of increasing volatility and liquidity over time to help these two markets mature faster.
Malaysian traders are allowed to participate in this SGX listed futures through your local licensed brokers.In 2015, the Asean Economic Community (AEC) targets to integrate the regional economy into a single and highly competitive market, equitable economic development and to prepare to be fully linked to globalisation.
Hence, putting both FKLI and SGX MSCI Malaysia Index Futures in counterparts will definitely increase the positive edges of them with wider global exposure.
DAR Wong is a licensed Fund Manager in Singapore with 25 years of trading experiences in global financial markets. The expressions are solely his own. He can be reached at [email protected]