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January 2021 APAC Market Structure Monthly

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January 2021 APAC Market Structure Monthly January 2021 APAC Market Structure Monthly Average Daily Turnover (Notional USD) Country Group Developed Markets Developing Markets KOR JPN 37.9B 30.7B CHN 282.6B IND TWN 10.6B HKG15.0B THA 54.3B 5.9B SGP 1.1B AUS 5.0B NZL 0.1B © 2021 Mapbox © OpenStreetMap Country Breakdowns Hong Kong Taiwan China India Japan Thailand Australia New Zealand South Korea Singapore January 2021 Hong Kong Market Structure News Record Turnover due to Southbound Trading HKEX Includes STAR Market Stocks into Stock Connect On 19 January 2021, the Stock Exchange of Hong Kong (HKEX) saw On 22 January 2021, HKEX announced the addition of eligible a record high in daily turnover totaling US$38.9B, in line with an A-shares listed on the Shanghai Stock Exchange (SSE) STAR already elevated YTD average of US$30.8B (for the period of 4 Market, to be included into the Stock Connect program with effective January to 8 February 2021). date 1 February 2021. This is due in part by HK-China Stock Connect’s Southbound Trading, The eligibility criteria for SSE STAR Market-listed stocks to be which also peaked on 19 January 2021 at US$12.86B (combined buy included into Stock Connect Northbound trading is consistent with and sell flow notional) and accounted for 16.4% of HKEX’s executed SSE/HKEX Stock Connect-listed securities, SSE STAR Market-listed turnover. Southbound Trading accounted for 17% of HKEX’s shares that are: “constituent stocks of the SSE 180 Index and SSE executed turnover, another record high, on the previous day. 380 Index, or have corresponding H-shares listed on HKEX for A+H companies”. On 25 January 2021, the Hang Seng Index (HSI) closed at 30,159.01, Similar to Shenzhen Stock Exchange’s ChiNext investor criteria, only surpassing the 30,000 threshold for the first time in the previous 20 institutional investors are eligible to trade SSE STAR Market-listed months. According to the source below, HSI is described as “the shares via the Stock Connect Northbound trading. world's cheapest major index” with Chinese southbound net inflow playing a notable role in the recent rally. On the launch date (1 February 2021), 14 SSE STAR Market-listed stocks were added to Stock Connect Northbound trading. Below is an https://asia.nikkei.com/Spotlight/Market-Spotlight/Hong-Kong-stocks-roar-into-2021-on-surge- of-investment-from-China. extract of this list: Data source: Virtu Financial, Stock Connect Northbound & Southbound flow monitoring HKEX Launches Mini USD/CNH Futures HKEX announced on 21 January 2021, plans to launch Mini USD/CNH (US dollar/offshore Renminbi, or RMB) futures in the first half of 2021. The contract will be cash-settled with a contract size of US$20,000. According to the source below, the new FX futures product was developed in response to market demand from smaller corporates and individuals to allow for more precise risk management. The new Mini USD/CNH offering is a smaller-sized contract which complements other existing HKEX RMB currency derivatives products. https://www.hkex.com.hk/News/News-Release/2021/210121news?sc_lang=en https://www.hkex.com.hk/News/News-Release/2021/210122news?sc_lang=en https://www.hkex.com.hk/Mutual-Market/Stock-Connect/Eligible-Stocks/View-All-Eligible-Securi- ties?sc_lang=en Page 1 Hong Kong Average Daily Turnover (Notional USD) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 40.0B 2020 2021 20.0B 0.0B Trade Size Distribution by Market Cap and %ADT (Notional USD) >=300% 200-300% 1500M 100-200% 50-100% 25-50% 1000M 10-25% Large 5-10% 500M 0M 1500M 1000M Mid 500M 0M 1500M 1000M Small 500M 0M l r r t c v y n n b g p u c a p e a o e e a u u J J O J A F D S A N M M Source data: Virtu Financial Page 2 Hong Kong Market Microstructure Observations · Historic record high monthly T/O recorded at US$54.3B, up 150%+ compared to January 2019 and 2020 levels. Also up ~80% compared to 2020 monthly average T/O. · January close auction contributed 5% of full day volume, down 1% compared to the 2020 average · One Minute Volatility in the first half hour was up 40% from December, (Previous high was 21.3bps in March 2020) Volume Curve Intraday Spread (bps) 20 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 e n 0 5 0 1 3 4 0 1 0 1 3 4 0 1 3 4 0 s e 3 4 o p l 0 0 0 0 1 1 3 3 3 3 4 4 4 4 5 9 9 o c 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 10 e m 0.15 u l o v 0.10 s ' y 0 a d 0.05 10 AM 11 AM 12 PM 1 PM 2 PM 3 PM 4 PM % Intraday Quotesize (Shares) Intraday Volatility (bps) 100K 30 20 50K 10 0K 0 10 AM 11 AM 12 PM 1 PM 2 PM 3 PM 4 PM 10 AM 11 AM 12 PM 1 PM 2 PM 3 PM 4 PM 2020 January Spread Bps 20 Q2 20 Q3 20 Q4 21 Q1 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 firstHalfHour 16.5 16.1 16.3 17.6 16.7 17.0 17.3 16.8 16.2 16.9 midday 13.5 13.6 13.6 13.9 13.5 13.3 13.3 13.0 12.9 13.4 lastHalfHour 12.9 13.1 12.9 13.4 12.8 12.9 13.0 12.6 12.7 12.5 One Minute Volatility Bps firstHalfHour 14.1 13.9 14.1 15.9 13.6 11.7 11.6 13.6 12.1 17.6 midday 7.5 7.8 7.5 7.2 7.3 6.6 6.4 6.8 6.0 8.1 lastHalfHour 7.5 8.5 7.7 9.2 6.4 6.8 6.8 7.3 6.7 6.9 Quotesize in Shares firstHalfHour 31,448 37,444 34,006 30,895 29,501 29,248 29,429 35,285 28,860 29,369 midday 50,803 72,786 62,092 50,675 54,851 52,922 59,646 67,190 59,993 52,420 lastHalfHour 94,215 120,128 103,136 85,097 88,503 86,562 92,522 112,401 93,657 80,787 Median used for all metrics One minute volatility is calculated using the difference between the high and low price within a one minute time bin, divided by that bin’s VWAP Source data: Virtu Financial Page 3 January 2021 China Market Structure News US Executive Order Ban on China Stocks, Status Update China Loosens Capital Account Restrictions As noted in previous Market Structure Monthly editions, on 12 November The Chinese central government announced the loosening of key capital 2020, former US President Trump issued an Executive Order (EO) restricting account restrictions, alongside new measures to facilitate cross-border US investors from transacting in certain Chinese securities with alleged renminbi transactions. military ties. On 4 January 2021, a notice on “Further Optimizing Cross-border Renminbi Policy and Supporting the Stabilization of Foreign Trade and Foreign While the restriction list continued to grow, on 28 December 2020, the US Investment” was jointly issued by the Chinese central bank, the Ministry of Office of Foreign Asset Control (OFAC) released its first FAQ to help Commerce, the China Banking, the Insurance Regulatory Commission, the address questions around the applicability of the EO, followed by an update State Administration of Foreign Exchange and the National Development on 8 January, which provided additional clarity. and Reform Commission. Key specific measures include: On 4 January 2021, the New York Stock Exchange (NYSE) initiated the • The capital account renminbi revenue of domestic institutions—including delisting process for three China Telco companies, on 5 January 2021 they funds from offshore—can be used within the business scope approved by reversed their decision and cancelled the delisting, and on 6 January 2021 authorities and under the specified conditions they changed course a final time and restarted the delisting process. • Cancelation of specialist account requirements for foreign direct Similarly, the Depository Trust & Clearing Corporation (DTCC) provided investment. initial guidance on withdrawing support for the impacted securities after 8 According the notice published, the measures came into effect on 4 January 2021, then relaxed the handling by supporting transactions until 13 February 2021. January 2021, and then subsequently began supporting the divesture of the impacted securities. https://www.chinabankingnews.com/2021/01/05/china-loosens-capital-account-restrictions-for- renminbi-revenue-usage/ https://www.safe.gov.cn/shanghai/2021/0108/1439.html At the close on 8 January 2021 (the Friday before the EO’s effective date), MSCI index stakeholders began to liquidate their China Mobile and other Relaunch of Ant Group IPO Possible Chinese telco positions. The heightened turnover on the HKEX was driven On 3 November 2020, the IPO of Ant Group, valued at US$34B, was pulled by the impacted stocks’ transaction volume and high volatility—heavily the day before its listing on both the SSE and the HKEX. skewing intraday volume distribution in the affected names towards the closing auction. On 27 January 2021, the head of the People’s Bank of China (PBOC), Yi Gang, spoke at the World Economic Forum in Davos and hinted at the On 11 January 2021, the EO’s effective date, further purchases in restricted possibility of resurrecting the Ant Group IPO by stating: “as long as we Chinese securities became prohibitive for US investors.
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