Until China Opens Up: Singapore – the Gateway to Asia

The growth of Singapore’s importance as the leading Asian FX trading Hub has been proved on many levels.

Seemingly, the most significant breakthrough had already been achieved in 2013 when the Bank for International Settlements (BIS) reported that Singapore had overtaken Japan as the third major FX trading center of the world. Singapore, with a 5.7% market share was ahead of both rival Asian financial hubs – Japan and Hong Kong.

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A similar evolution is being observed in the case of regulated FX futures turnover. Back in January of 2015, the total trading volume at the Singapore Exchange (SGX) was equivalent to 239,261 contracts. At the end of December, the monthly volume grew to the level of 425,188 traded contracts; an impressive growth of 77%.

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It makes a lot of sense to be based here as it provides access to a thriving local market but also to rapidly growing economies of Southeast Asia, China and India, and is home to over 7,000 multi-national companies

Financial firms offering FX/CFD trading were quick to spot the opportunity in Singapore. Foremost leading international brands had already emerged in 2006. These were branches of IG Group and Saxo Bank. Both were quickly followed by their long-time rivals, CMC Markets and Oanda. But is it Singapore that may enjoy the upper hand in rivalry for the title of local retail FX/CFD hub? What about Japan and HK? Which one has the brightest future?

An interesting study and conclusions in relation to the situation in this region were presented by the IMF in a recent presentation. In one of them, Hong Kong is the financial center for China, and Singapore is the financial center for the rest of the Asia. In the remaining scenarios, things evolved in very different, interesting directions. These directions should be considered by brokers looking seriously at this region.

Conclusion

With the situation in China still in its developmental phase, a lot has to be done before the local market is fully accessible to international brands. Growth potential is large but so are the obstacles. Singapore is already a very large retail market and a local financial hub. Whereas China could create big opportunities in the future, Singapore is already doing this. Staying outside of it may cost future competitors fighting for Asia more than one can imagine.

Want to learn more about the Singapore and other interesting financial markets? A detailed article on this topic can be found inside the our Industry Report for the first quarter of 2016.