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Asian Stock Market Aims to Reinvent Itself with European-Style Trading

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Singapore Exchange Introduces Structured Certificates to Revitalize Market

Introduction of Structured Certificates

The Singapore Exchange (SGX) has become the first exchange in Asia to offer trading in "structured certificates," a move aimed at revitalizing the market. These financial instruments, based on underlying assets, provide investors with exposure to the performance of the asset, whether it's a single stock or an equity index. While it's still early to determine the demand for these securities, market participants believe that the introduction of structured certificates broadens the range of investment options available.

Benefits and Potential Impact

Structured certificates offer transparency and daily pricing, enabling investors to liquidate their positions more easily compared to over-the-counter (OTC) products. However, analysts suggest that growing this market in the short term will require significant efforts from all involved. The move to broaden the equity-linked product base, including the offering of depository receipts and structured certificates, could drive incremental market interest and provide investors with a wider choice of market and thematic exposure.

Market Potential and Investor Sophistication

Structured certificates have gained popularity in Europe, where investors have a strong focus on yield. In Asia, these instruments were previously only available OTC and limited to accredited investors through private banks. By listing them on the exchange, SGX expands the distribution perimeter, making them accessible to a broader range of investors. Singapore's status as a wealth management center, coupled with investor sophistication and a desire for yield-enhanced products, creates a favorable environment for the growth of structured certificates.

Autocall Feature and Risk Considerations

Some structured certificates, such as those offered by SGX, include an autocall feature. These yield enhancement certificates expire after a set time, providing investors with a fixed coupon rate or return upon expiry. Investors should carefully assess their market expectations, as these certificates involve a trade-off between potential capital gains and the assured return at the end of the period. In the case of market downturns, investors will hold the shares at their current market value upon expiration. In conclusion, the introduction of structured certificates by the Singapore Exchange marks a significant step towards revitalizing the market and expanding investment options. While it is still early to gauge the demand, the move aligns with the growing interest in yield-enhanced products and the desire for broader market exposure. Investors should carefully consider the potential benefits and risks associated with structured certificates as they navigate the evolving investment landscape.

Structured Certificates: A New Era for the Singapore Exchange and Potential Impact on New Businesses

Structured Certificates: A Market Revitalization Strategy

The introduction of structured certificates by the Singapore Exchange (SGX) signifies a pioneering move in Asia's financial market. These financial instruments, founded on underlying assets, offer investors an opportunity to diversify their portfolios. For new businesses, this development presents a broader range of investment options and potential avenues for capital growth.

Benefits and Challenges: A Balancing Act

Structured certificates provide transparency and daily pricing, facilitating easier liquidation compared to over-the-counter (OTC) products. However, the growth of this market will require concerted efforts from all stakeholders. New businesses need to stay abreast of these developments, understanding the potential impacts and benefits these instruments can bring to their financial strategies.

Market Potential: A New Horizon for Investors

The popularity of structured certificates in Europe, coupled with Singapore's status as a wealth management center, creates a fertile ground for these instruments in Asia. The listing of structured certificates on SGX expands their accessibility beyond accredited investors, opening up opportunities for new businesses to tap into this market.

Autocall Feature and Risk Considerations: A Trade-off

Structured certificates, such as those offered by SGX, come with an autocall feature that assures a fixed return upon expiry. However, these instruments involve a trade-off between potential capital gains and the assured return. New businesses must carefully assess their market expectations and risk tolerance before venturing into structured certificates. In essence, the introduction of structured certificates by SGX marks a significant milestone in the evolution of Asia's financial market. As the market continues to evolve, new businesses must navigate the challenges and opportunities presented by these emerging financial instruments.
Story First Published at: https://www.cnbc.com/2023/09/28/asian-stock-market-is-trying-european-style-trading-to-reinvent-itself.html
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