Societe Generale (SocGen) is set to launch new daily leverage certificates (DLC) on the Singapore Exchange (SGX) on 24 January.
This comes following the launch of the initial batch last July, which generated SGD 1.6 billion in turnover.
The new structured products will allow investors to leverage up to seven times - the highest level in the Singapore market - with long and short exposure to returns of the underlying indices.
This includes MSCI Singapore, Hang Seng Index and Hang Seng China Enterprises Index.
The ten existing products offer three and five times leverage and have generated SGD 1.6 billion ($756.2 million) in turnover in the past six months, with an average daily turnover of SGD 14 million ($10.5 million).
In comparison, all structured warrants traded on the SGX accounted for SGD 58 million ($43 million) of average daily turnover last year.
At a press briefing in Singapore, Keith Chan, head of cross asset listed distribution at SocGen, highlighted that the 5x leverage products were the most popular.
‘We also got feedback from traders who wanted even higher leverage so we are very happy to launch this. If you look at the turnover, over 90%, or even close to 100% of the volume, is on the 5x. The 3x isn’t traded as much at all,’ he said.
Chan added that 60-70% of the turnover in 2017 was on the MSCI Singapore Free index.
He is currently in talks with private banks, but while the product is available to accredited investors, the key target market is trading representatives at local securities brokerage firms.
DLCs are short-term structured products that are usually traded intraday. They are high risk products meant mainly for highly active traders.
An answer to Hong Kong’s leveraged and inverse ETFs, which were allowed to list on the Hong Kong Stock Exchange in January last year, the DLCs are offered only to Specified Investment Products-qualified investors in Singapore.
Chan said the 7x certificates, which are valued at SGD 2.5 at launch, come with an airbag feature of 10%, which suspends the trade for 30-45 minutes if the underlying index falls by 10% or more.
When trading resumes, SocGen, the market maker, determines the new base for the index.
‘If its 7x and the market is down 10%, he [the investor] will at least lose 70%. After the airbag, if the index rebounds 10%, the investor won’t get back 70% because the index’s base is lower. But the key is that it won’t go below zero because of the airbag,’ he explained.