News Analysis: Singapore market players keen to ride on spillover effect of China mania

With both Shanghai and Hong Kong bourses soaring last week buoyed by the Stock Connect, China- related investment products also gained traction among Singapore investors.

By Friday, the benchmark Shanghai Composite Index managed to cross the crucial 4,000 points mark amid bullish mood. Benefiting from the massive fund inflow through the southbound Stock Connect, Hong Kong's benchmark Hang Seng Index outperformed the region by surging 7.9 percent for the week after long holidays.

While Singapore bourse did not fare badly either and the market index hovered at seven-year high, its recent rise was rather modest if compared to its Shanghai and Hong Kong peers.

With component stocks of the index unlikely to advance significantly ahead of first-quarter earnings season and also due to uncertainty over U.S. interest rate outlook, Singapore market players are now counting on the spillover effect of China mania from the Stock Connect to boost investment returns.

The quest for spectacular gain from China mania was most evident in the rising trading interest in SGX FTSE China A50 Index Futures available in the Singapore Exchange.

Tracking the performance of the largest 50 "A" shares companies in China, the world's only offshore futures tracking the China A- share market had received higher daily average turnover this month compared to that of the previous month, as the rally in Shanghai stock market gained momentum.

Last week, the index future rose 5.9 percent compared to mere 0. 5 percent gain in the local market benchmark Straits Times Index.

The buying interest in Singapore-listed Chinese companies, or companies with operations in China, which were also known as S- chips in the city-state, also picked up amid this wave of China mania.

While most of them remained in oblivion due to past corporate scandals that occurred in a number of suspended peers, some individual S-chips were enjoying robust trading and thus significant price gains lately, as indicated in their frequent ascendance to top active list of the day.

Indeed, such sudden surge in interest had caught the attention of the regulators. For instance, SIIC Environment Holdings, a unit of Hong Kong-listed Shanghai Industrial Holdings, had to answer query from Singapore Exchange last Thursday that it was not aware of any reasons to explain unusual trading volumes in its shares on Wednesday when its shares also gained 10.5 percent.

Singapore investors might have bought these shares in the hope of more capital inflow from China following huge gains in Shanghai and Hong Kong bourses. As China has yet to open up her capital account that will allow China individual investors to pour money freely beyond China soil, such hope may have been a bit overstretched. But there is little doubt that any slight benefit of this wave of China mania will be welcomed in the Singaporean market.

So for now, the waiting game is on among market players who believe S-chips will enjoy gains similar to Shanghai's and Hong Kong's recent rally. Endi