MAS Annual Report 00/01 - Equity and Derivatives Markets

Equity

Stock Market Performance

The benchmark Straits Times Index (STI) started the year 2000 at 2,480. Initial optimism that the US economic boom could be sustained, albeit at a slower pace, lent support to the market. The STI hit an all-time high of 2,583 on 3 January 2000. (See Chart 30.)

However, from January through May 2000, worries of a dramatic slowdown in the US economy prompted a selldown in the major markets. The STI followed in tandem and dropped to 1,782 on 30 May 2000, the lowest level in 2000.

From May to August 2000, the market experienced a mild technical rebound and traded up to 2,221 before easing to 1,797 in October 2000. For the rest of the year, the STI hovered within a tight trading range, ending the year at 1,927.

The STI began 2001 with a boost from the US Federal Reserve's unexpected reduction of 50 basis points in the Federal Funds rate. The US subsequently lowered this rate to 5% in two further half-point reductions in the first quarter of 2001. These rate reductions were, however, perceived by the market as insufficient to spur consumer confidence and to prevent economic hardships experienced by the business community. The major stock markets thus remained weak. The STI, in particular, was unable to strengthen beyond the 2,000 psychological resistance level.

On the back of more corporate profit warnings, announcements of significant staff layoffs by bellwether companies and weak domestic economic figures, the STI finally broke the major technical support at 1,800 in mid-March 2001 and ended the quarter at 1,674, a level not seen since April 1999.

Market Capitalisation and Turnover

Market capitalisation decreased by 11.3% to $417.8 billion as at end-2000. End-March 2001 saw market capitalisation at $378.6 billion, a 9.4% decrease from the former figure.

Turnover on SGX-ST decreased by 12.6% from $196.9 billion to $172.0 billion in 2000. Turnover in units transacted dropped 36.3% to 99.3 billion units. In the first quarter of 2001, turnover decreased by 30.9% to 21.0 billion units. (See Chart 31.) This translated into a decrease of 34.8% from $53.7 billion to $35.0 billion in value terms.

Funds Raised

In 2000, funds raised through SGX-ST increased from $12.2 billion to $14.2 billion. The flotation of 81 companies raised $3.4 billion, while rights issues raised $341.2 million. Bond issues accounted for $8.7 billion of funds raised and private placement of shares $1.8 billion.

In the first quarter of 2001, the amount of funds raised increased by a significant 138.8% to $4.3 billion compared with $1.8 billion in the first quarter of 2000. This sharp increase was attributable to bond issues which accounted for $4.0 billion as compared to only $679.5 million in the first quarter of 2000. Funds raised through IPOs amounted to $244.2 million. There were neither rights issues nor private placements conducted in the first quarter of 2001.

New Listings

In 2000, 63 companies were admitted to the SGX-ST Main Board while nine were delisted. Twelve companies were transferred from SESDAQ to the Main Board while SESDAQ saw 24 new listings. These changes brought the number of companies listed on the Main Board and SESDAQ as at end-2000 to 400 and 93 respectively.

Six companies were admitted to the Main Board and six companies to the SESDAQ in the first quarter of 2001. These admissions, coupled with the delisting of four companies from the Main Board, brought the end quarter number of companies on the Main Board and SESDAQ to 402 and 99, respectively.

Financial Position of Stockbroking

Companies

The financial position of SGX-ST member companies weakened by 1.6% in 2000 with the shareholders' funds at $3,337.0 million while the adjusted net capital decreased by 1.7% to $3,050.7 million. For non-SGX-ST members, the shareholders' funds increased by 15.1% to $1,438.7 million, while the adjusted net capital increased by 132.0% to $469.4 million. (See Table 4.)

Financial Futures

In 2000, total trading volume on SGX-DT increased by 6.6% from 25.9 million contracts in 1999 to 27.6 million contracts. Average daily turnover in 2000 increased from 101,502 contracts in 1999 to 107,522 contracts. During the first quarter of 2001, an average daily volume of 125,228 contracts was traded on the Exchange, compared with 110,320 contracts in the corresponding period in 2000. At end-March 2001 there were 13 futures and seven options contracts trading on the Exchange.

Trading interest continued to be dominated by the three-month Eurodollar and Euroyen interest rate futures contracts, as well as the Nikkei-225 stock index futures contract. Total volumes traded in Eurodollar and Euroyen contracts increased while that in the Nikkei-225 contracts decreased in 2000, compared to the previous year. The three-month Eurodollar interest rate futures trading volume rose by 12.2%from 9.0 million contracts in 1999 to 10.1 million contracts in 2000. The three-month Euroyen interest rate futures volume was up by 4.4% from 6.8 million contracts in 1999 to 7.1 million contracts; while the Nikkei-225 stock index futures volume was down by 16.7% from 5.4 million contracts to 4.5 million contracts.

Since its launch in September 1998, demand for the MSCI Singapore stock index futures had increased, with a total of 479,486 contracts traded in 2000, an increase of 64.5% from 291,527 in 1999.

Two new contracts were launched in 2000, namely the STI futures on 28 June 2000 and the S&P CNX Nifty Index futures on 25 September 2000. The STI futures enjoyed a good start. Active trading chalked up a total of 47,106 lots for the seven months that it was traded in 2000. Interest in the S&P CNX Nifty Index was also positive with a total of 20,403 lots traded for the four months in 2000 following its launch. The Dow Jones Thailand Stock Index futures contract was declared dormant with effect from 1 November 2000 due to lack of market interest.

New volume records were set: the three-month Eurodollar futures contract set a new high in terms of annual trading volume at 10,083,633 in 2000, while the Japanese Government Bond futures saw its highest annual volume at 718,353 in 2000 and the highest daily volume of 38,860 on 5 December 2000. In addition, the Singapore Dollar interest rate futures boasted a high in annual trading volume of 61,300 in 2000. The MSCI Taiwan stock index futures hit a record annual volume of 3,390,153 lots, while the MSCI Singapore stock index futures set a record annual volume of 479,486 in 2000.

Trading in all the contracts increased by 6.6% to a total volume of 27,571,963 lots in 2000.

For its achie ements, SGX-DT was named Derivatives Exchange of the Year 2000 by the AsiaRisk and The Asset magazines.