Last month (July 2020) saw the 3rd anniversary since Daily Leverage Certificates (DLCs) were launched on SGX. Issued by Societe Generale, DLCs are short-term trading instruments for gaining leveraged exposure to market movements in both long and short positions.
The market turmoil in March 2020 saw particularly heavy activity by DLC traders. According to SGX, turnover for DLCs tripled from a year prior, with 50% more active participants.
Currently, there are 123 DLCs that offer 3, 5 or 7 times leveraged exposure to indices (like the MSCI Singapore Free Index, Hang Seng Index, and Hang Seng China Enterprises Index) as well as individual stocks listed on the Singapore Exchange (SGX) and the Hong Kong Exchange (HKEX).
For this week’s instalment of 4 Stocks This Week, we will look at four counters that are available for trading with DLCs.
Hang Seng Index
The Hang Seng Index (HSI) is the most popular index in Hong Kong and is often the main point of reference for how well the Hong Kong stock market is performing.
The index comprises 50 constituents, grouped into four main segments: Finance, Utilities, Properties, and Commerce & Industry (which also includes a growing segment of technology companies).
The top 5 stocks on the HSI in terms of weighting are Tencent, AIA, HSBC, China Construction Bank and Ping An Insurance. Combined, the market value of HSI constituent stocks cover about 60% of the total market value in Hong Kong.
On 7 September 2020, HSI will be executing a reshuffle, with Sino Land, Want Want China Holdings and China Shenhua Energy being dropped, and Alibaba, Xiaomi and WuXi Biologics taking their place.
This week, the HSI gained 1.2% to end at 25,422.06, just falling short of the landmark 25,500 resistance level by a little.
Alibaba (HKG: 9988)
Founded by the legendary KFC-reject Jack Ma in 1999 and his other 17 co-founders, Alibaba is one of the fastest-growing and most influential e-commerce/technology companies in China and the world today.
Alibaba operates across various business units of core commerce, cloud computing, digital media and entertainment, as well as innovation. Alibaba owns well-known and popular platforms like Taobao, Tmall, Lazada, AliExpress, 1688.com, Alibaba Cloud, Youku, and FinTech services arm Ant Group.
On 20 August 2020, the company announced their 2Q2020 results. Total revenue was RMB 153,751 million, an increase of 34% year-on-year.
Alibaba is dual-listed, trading under the ticker BABA on the New York Stock Exchange, and 9988 on the Hong Kong Stock Exchange. HKG 9988 gained about 6% this week to close at HKD $277.
Tencent (HKG: 0700)
Tencent owns and operates the ubiquitous Chinese super apps WeChat/Weixin and QQ, alongside other digital services like mobile gaming, online video, news services and online advertising.
According to company tracker CrunchBase, Tencent has made 14 acquisitions and 484 investments, including owning significant stakes in two of the most popular Battle Royale-style games: Fortnite and PubG, as well as owning Riot Games, the creators of the massively popular League of Legends game.
Together with ByteDance’s TikTok, Tencent’s WeChat was in the crosshairs of a Trump-orchestrared ban in the United States. As a result, Tencent’s stock price saw increased volatility, though this was followed by a degree of recovery after White House officials came out to assure businesses that it would not be an all-out ban.
Tencent closed this week at HKD $540.50, seeing a gain of about 0.6%.
Geely Auto (HKG: 0175)
Started in 1997, Geely Auto was China’s first privately-owned automobile manufacturer, and the company began export sales overseas in 2003. It debuted in the Hong Kong Stock Exchange in 2005.
Since 2010, Geely acquired Volvo Cars from Ford, making it China’s first global automotive player. Geely also own a 49.9% stake in Malaysia’s national auto-maker Proton. With a market capitalization of about USD $20 billion, it is of comparable size to its better-known peers like Nissan and Fiat Chrysler.
Earlier this month, Geely announced that its 1H2020 profits dropped by 43% due to the COVID-19 pandemic. Geely is in the midst of planning a secondary listing in the mainland Chinese market. The stock closed at HKD $15.74 this week.
Want To Test Your Prowess Against Fellow Traders Using DLCs?
Incidentally, DLCs are the theme of the SG Active Trading Tournament, which saw more than 2,000 traders taking part last year, competing against each other using various active trading strategies based exclusively around using DLCs.
Singapore’s largest trading competition is back in 2020, and you’re invited to take part and test your prowess against fellow traders. Registration is free, and you’ll be using real market data to challenge for $10,000 worth of prizes.
For more details and to throw your hat in the ring, visit organiser InvestingNote’s website. The first round of the tournament will commence on 10 September 2020. Good luck and happy trading!
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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.