How do Singapore's traders react to global volatility events?

The Chinese slowdown, Britain’s vote to leave the EU and Trump’s election all set off major market volatility in 2016. What lessons can we take from these events going forward?

In the current political landscape, financial markets are constantly confronted with new dramas to give traders cause for concern. And there’s bound to be more uncertainty round the corner, whether caused by new leadership, major elections or influential legislation.

In anticipation of renewed volatility, we’ve taken a look at how IG clients in Singapore traded three major market-moving events in 2016: China’s market slowdown, the UK’s vote for Brexit and the election of Donald Trump as 45th president of the United States. What were the patterns and behaviours present among previous volatility events, and what can we learn from them for the next time?*

View the volume of trades across all three events, as well as the volume of positions opened per asset class, by clicking on the charts below. You’ll find a more detailed overview of each individual event underneath.

China’s slowdown

It was an uncertain start to 2016, as China’s ‘circuit breaker’ shutdown measure came into effect for the first time.

The UK votes for Brexit

The UK’s unexpected vote to leave the European Union caused widespread unease in the financial markets. 

US presidential election

Trump’s election as president upset all expectations – and continued to surprise as it kicked off a significant rally.

China’s ‘circuit breaker’ slowdown

Fears over China’s economic growth ensured 2016 kicked off with uncertainty, as indices around the world slumped and the Chinese regulator was forced to utilise its ‘circuit breaker’ shutdown measure for the first time – before abandoning the measure shortly after.

'Global equity markets are in freefall as yet another Chinese shutdown caused mass panic across European futures markets. For many in the City, there was a feeling that the show was over before it had begun, with the FTSE 100 already down almost 2% by 7am.'1
Joshua Mahony, IG market analyst, London, 7 January 2016

How was it traded?2

The Chinese slowdown had a significant impact on huge number of countries dependent on its flourishing economy, and Singapore was no exception. In fact, it was perhaps one of the most vulnerable, as underscored by the drop in its raw material exports (even relative to a 2015 defined by sluggish US demand). 

It’s perhaps surprising to see, then, that the shutdown wasn’t of greater interest to traders. Despite an uptick at the beginning and close of the trading day, activity during the main session was relatively subdued. In contrast, UK traders – for whom unfamiliar Asian markets carry their own unique challenges – carried out upwards of 70,000 trades. 

There may be some explanation for this in Singaporean traders’ favour for forex. The conversation around the slowdown largely surrounded equity markets in freefall, both close to home and further afield. As indicated by the chart above, forex is by far and away the most popular asset class with traders in Singapore. It may be that given the heightened impact on indices, they simply weren’t as engaged in trading this major event as they would be come later events. 

Taking a closer look at the data only confirms these findings further. The most highly traded shares – Yangzijiang Shipbuilding, Apple and banking stocks – will have likely have drawn attention for reasons unrelated to the circuit breaker. 

 

Findings in full

Platform/trader

  • 58% of all trades were executed via mobile, with the highest volume of mobile trades arriving between 3pm and 5pm on 7 January1
  • 33% of all trades were via iPhone, compared to 25% via Android
  • 69% of Singaporean traders aged in their 30s used a mobile device to trade, whereas 71% of Singaporean traders aged in their 60s traded via desktop
  • The average age among those trading the Chinese slowdown was 42

Asset class

61% of trades opened during this event were on forex, 33% were on indices, 4% were on shares and 2% were on commodities.

Key markets

USD/CNH

  • Traders generally avoided the yuan: just 0.5% of all forex trades were on USD/CNH

 

Top markets 

Top five indices
The most traded stock index during this event was the DAX with 29% of all indices trades. The Dow was second with 20% and third was the S&P 500 with 13%. Fourth was the Hang Seng with 9% and fifth, the Singapore STI with 5.5%.

Top five FX pairs
The most traded currency pair during this event was EUR/USD with 35% of all forex trades. In second was AUD/USD with 21% and third was USD/JPY with 14%. GBP/USD was fourth with 6% and NZD/USD fifth, also with 3%. 

Top three commodities
Gold was the commodity with the highest volume of trading – 41% of all Singaporean commodity traders opened a position. In second, 40% traded US crude, and in third, 6% traded Brent crude. 

Top five shares
8% of IG’s Singaporean share clients opened a position on Yangzijiang Shipbuilding Holdings. DBS Group was the second most traded with 7% of trades, Apple was third with 5.6% and fourth was Keppel Corp on 4.8%. Fifth was Oversea-Chinese Banking Corp with 3.7%.

The UK votes for Brexit

Prime Minister David Cameron kept his pre-election promise, holding a referendum on Britain’s EU membership. Despite polls pointing to a narrow victory for Remain, the UK voted to leave by 52% to 48%. 

'UK stocks have so far proved fairly immune to EU referendum polls, suggesting an exit is almost as likely as a vote to remain. That will change if the UK electorate does vote for Brexit.'
Chris Beauchamp, IG market analyst, London, 25 April 2016

How was it traded?3

Forex was once again the centre of focus during the EU referendum, where trading as a whole saw an uplift over the Chinese slowdown. EUR/USD and GBP/USD were two of the most highly traded markets, reflecting an overall responsiveness to the volatility that was rocking sterling and the euro.

There was far less interest in Brexit’s tangible impact on business, however. Traders generally avoided European indices, with the exception of the DAX. Far more attention was paid to the key American indices and the Nikkei, clearly for reasons entirely unrelated the UK vote. Likewise, shares that saw the greatest activity were beyond the reach of Brexit’s impact. This is a far cry from UK and European traders, whose knowledge of domestic and neighbouring markets perhaps gave them an insight Singaporean traders lacked.

The announcement of the referendum result at 11am saw a huge surge in trades. The ability to respond quickly was clearly a key factor in this spike, emphasising the benefit of trading on mobile. Throughout the course of the day, 64% of trades were carried out on our apps – a stat in line with the other major volatility events, where traders consistently demonstrated a preference for mobile over desktop. 

Findings in full

Platform/trader

  • 64% of all trades were executed via a mobile device, with the majority of mobile trading taking place between 10am and 12pm
  • 40% of all trades were via iPhone, compared to 24% via Android
  • 66% of traders aged in their 30s used a mobile device to trade, compared to 59% of traders aged in their 60s
  • The average Brexit trader was 42

Asset class

64% of trades opened during this event were on forex, 27% were on indices, 6% were on commodities and 3% were on shares.

Key markets

GBP/USD

  • On the day of the referendum, trader sentiment was split evenly, with 49% of all traders taking a positive outlook on the pound
  • Trading peaked at 11am
  • For days after the result was known, sentiment remained divided, suggesting that traders were unsure of – or uninterested in – the impact this would have on the pound

Top markets 

Top five FX pairs
The most traded currency pair during this event was EUR/USD with 21.4% of all forex trades. In second was USD/JPY with 21% and third was AUD/USD with 19%. GBP/USD was fourth with 18.7% and GBP/JPY fifth, also with 3.6%.

Top five indices
The most traded stock index during this event was the Dow with 22% of all indices trades. The DAX was second with 18% and third was the NIKKEI with 12%. Fourth was the S&P500 with 11% and fifth, the Hang Seng with 10.7%.

Top three commodities
Gold was the commodity with the highest volume of trading – 86% of all commodity traders opened a position. In second, 6.3% traded silver, and in third, 3.6% traded US crude. 

Top five shares
8% of IG’s share clients opened a position on DBS Group. United Overseas Bank was the second most traded with 4% of trades, Oversea-Chinese Banking Corp was third with 3.5% and joint fourth was Keppel Corp on 3% with Liberty Media Corporation.

US presidential election

Hillary Clinton and Donald Trump went head to head in a bitterly fought election contest, with polling once again proving unreliable as Trump stormed to victory. In the markets, initial pessimism gave way to a major Trump rally.

'We have finally arrived at the week in which the person who holds the fate for the next four years of the world’s largest economy will be made known. The markets are strongly favouring Democratic nominee Hillary Clinton over Republican candidate Donald Trump, the latter associated with heightened volatility.'
Jingyi Pan, IG market analyst, Singapore, 4 November 2016

How was it traded?4

With 23,908 positions opened, the US presidential election was by far the most traded volatility event of 2016 – beating Brexit by 41% and the China slowdown by 148%. 

Global markets may have chosen to get behind the new president, but Singaporean traders appear to have been more sceptical. 62% of traders on the Dow Jones took a negative view between 5am on 9 November and 5am on 10 November, even as the index surged. 

Throughout the trading day, this scepticism remained firmly in place. Optimism for the Dow was generally in the minority, and by the end of the day traders had doubled down on their fears for the index’s future prospects. At one point, 90% of traders had chosen to adopt short positions.

Further evidence that traders were wary of President Trump comes in the popularity of gold over this period, a market traditionally viewed as a safe haven. When Trump secured the election win, 90% of all commodity trades were on the precious metal.

But his election was first and foremost an opportunity for traders to take positions on major dollar pairs, including USD/JPY (38% of all trades), EUR/USD (25%), AUD/USD (15%) and GBP/USD (5%). While preference for the dollar was in keeping with Singaporean trends towards forex, it was also in line with traders worldwide, for whom volatile currency movements were the primary focus. 

Findings in full

Platform/trader

  • 66% of all trades were executed via a mobile device, with the majority of mobile trading taking place between 10am and 1pm
  • 41% of all trades were via iPhone, compared to 25% via Android
  • Mobile dominated with 74% of traders aged in their 30s trading via mobile, and 58% aged in their 50s doing the same
  • The average US election trader was 41

Asset class

65% of trades opened during this event were on forex, 24% were on indices, 9% were on commodities and just 1% were on shares.

Key markets

Dow Jones

  • 62% of trades over the period from 5am on 9 November to 5am on 10 November were negative
  • Dow trading peaked at 10pm on 9 November when the result was in no doubt
  • Just 41% of trades were negative at 9am, while 52% were at 11am1

USD/JPY

  • 38% of all trades were on the dollar-yen, almost 14% more than the next most popular, EUR/USD. The dollar was a key barometer of the election outcome, meaning traders saw it as the first stop for opportunity 

Top markets 

Top five FX pairs
The most traded currency pair during this event was USD/JPY with 38% of all forex trades. In second was EUR/USD with 24% and third was AUD/USD with 14%. GBP/USD was fourth with 8% and AUD/JPY fifth, also with 2.7%.

Top five indices
The most traded stock index during this event was the Dow with 34% of all indices trades. The DAX was second with 18% and third was the Hang Seng with 11%. Fourth was the S&P500 with 10.1% and fifth, the Nikkei with 7.5%.

Top three commodities
Gold was the commodity with the highest volume of trading – 90% of all commodity traders opened a position. In second, 6.9% traded silver, and in third, 1.6% traded US crude. 

Top five shares
6.3% of IG’s share clients opened a position on DBS Group. Keppel Corp was joint second most-traded with 3.5% of trades with CapitaLand. Joint fourth was American Airlines and Global Logistic Properties, both on 3%.

Conclusion

After a 2016 of electoral upsets and unexpected market developments, it’s clear that there are lessons to be learned to prepare for future major volatility events. So for all the factors we aren’t able to anticipate, what can we take from the last twelve months?

The markets to watch

Clearly no major event has the same repercussions, but it seems wherever there’s volatility, there are always a few markets first in line for traders. 

Take those who traded on China, Brexit and Trump, for example. In every case, the top three currency pairs they rushed towards were USD/JPY, AUD/USD and EUR/USD, and the top two indices were the Dow and the DAX. In light of the globally significant nature of these markets, it may come as no surprise that these are where major trading opportunities lie. But they may also offer hints as to how the long-term fallout of the event could turn out.

Untapped potential in unfamiliar markets

Singapore’s traders are particularly receptive to volatility that can be measured by currency movements, and as a result they’re firmly wedded to forex trading.

Meanwhile, major indices, stocks and commodities affected by the Chinese slowdown, Trump’s election and the Brexit vote went largely overlooked. Understandably so, in light of a relative lack of familiarity with the smaller-scale, more domestic impact of each of these events. But the scope of potentially volatile markets available elsewhere suggests there are opportunities left untapped. It may well be worth getting to grips with new markets moving forward. 

Trading goes mobile

Given that high-volatility events unfold over the course of a number of hours or days, it makes sense that traders wouldn’t be tied to their desktops.

In all three events, around 60% of all trades were carried out on iPhone or Android, no doubt owing to the flexibility of trading on the move. The growing popularity of mobile trading is a worldwide trend, but Singaporean traders stand out from their peers elsewhere in just how much the older age groups have taken to mobile trading. Over Trump’s election win, for example, 58% of Singaporean traders in their 50s traded via a mobile device – compared to just 41% in Australia and the UK.

The extent to which mobile trading can increase its dominance remains to be seen, but at least for now, it appears that traders in Singapore are well ahead of the curve. 

All times are Singapore time.

2 All positions opened by experienced Singapore clients on our web platform, Android and iPhone from 5am on 7 January to 5am on 8 January 2016.

3 All positions opened by experienced Singapore clients on our web platform, Android and iPhone from 3am on 24 June to 3am on 25 June 2016, and all GBP/USD positions opened by experienced UK clients on our web platform, Android and iPhone from 17 June to 1 July.

4 All positions opened by experienced Singapore clients on our web platform, Android and iPhone from 5am on 9 November to 5am on 10 November 2016, and all Dow Jones positions opened by experienced Singapore clients on our web platform, Android and iPhone from 2 November to 15 November 2016.
 

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