The MSCI Singapore Index (SiMSCI) is designed to measure the performance of the large and mid-cap segments of the Singapore market. Its 28 constituents include 26 constituents of the Straits Times Index (STI), with STI constituents Hongkong Land, SATS, SIA Engineering and Thai Beverage PLC not a part of the SiMSCI.

In the year thus far, the underlying SiMSCI has declined 0.5% compared to the MSCI World Index, which has declined 4.4% on a SGD basis. More information on Index fundamentals, risk and return characteristics in addition to sector weights and index methodology can be found here.

SiMSCI Futures derive their price from the underlying SiMSCI. Aside from the level of the underlying index, there are three factors which can influence the relative price of the SiMSCI Futures – interest rates, dividends of SiMSCI constituents and general bullish or bearish sentiment. The former two variables – interest rates and dividends of SiMSCI constituents – can be used to determine a theoretical value of the Futures Contracts. For instance this afternoon, the following theoretical values could be determined for the SiMSCI Futures with March and April expires.

15 March 2016 1:30pm Trading

	Trading Prices	Theoretical Value
SiMSCI Underlying	319.67	N/A
March 2016 SiMSCI Futures	319.95	319.86
April 2016 SiMSCI Futures	317.20	317.15

Interest Rate Impact on March SiMSCI Futures

Because the SiMSCI Futures are leveraged, full funds are not required to maintain a long or short position on the Index. This means that typically more than 95% of the equivalent dollar value of the contract can be freed up to earn interest in the bank. The SiMSCI Futures are denominated in Singapore dollars (SGD) with recent 3-month SGD SIBOR rates at 1.24%.

Hence, from 15 March until 30 March 2016, the holder of a March 2016 SiMSCI Futures would be able to earn an approximate extra 0.06%, or 0.19 Index points, by holding the Futures in place of holding the relevant Index stocks. The ability to earn interest on freed-up funds means the Futures is priced at a premium to the underlying Index.

As at 1:30pm, while the SiMSCI underlying was trading at 319.67, the theoretical value of the March SiMSCI Futures contract was trading at 319.86. At that time, the March SiMSCI was trading between 0.05 and 0.10 points higher at 319.95.

No SiMSCI constituents are scheduled to distribute a dividend in the remaining sessions of March, hence there is no dividend adjustment required in pricing the March SiMSCI Futures Contract.

Interest Rate & Dividend Impact on April SiMSCI Futures

Six SiMSCI constituents have announced dividend distributions that are scheduled to go ex-dividend in April, while Bloomberg consensus estimates another six SiMSCI constituents will schedule ex-dividend dates in April. These 12 stocks represent as much as 60% of the SiMSCI weightings. Based on weights and prices as at Tuesday noon, these dividend distributions in April represent 2.99 SiMSCI points. 

As tabled below, the impact a dividend will have on the SiMSCI Futures will depend on the size of the stock’s dividend versus its price, in addition to how much weight the stock has within the Index.

Security Name	Price at 1:30pm	Index Weight %	April Dividend Expected or Confirmed	Amount Expected or Confirmed	Dividend Return to Stock Price in %	Index Point Impact of Dividend
OCBC Bank	8.900	12.6	Conf	0.180	2.02	0.81
United Overseas Bank	18.860	11.2	Conf	0.350	1.86	0.66
Keppel Corp	5.970	4.0	Conf	0.220	3.69	0.47
CapitaLand	3.160	3.7	Exp	0.080	2.53	0.30
Singapore Exchange	7.750	2.9	Exp	0.050	0.65	0.06
CapitaLand Mall Trust	2.110	2.4	Exp	0.029	1.36	0.10
Ascendas Reit	2.410	2.3	Exp	0.080	3.32	0.25
Singapore Tech Engineering	3.150	2.2	Conf	0.050	1.59	0.11
Golden Agri Resources	0.415	1.3	Conf	0.005	1.22	0.05
United Overseas Land	5.870	1.3	Exp	0.150	2.56	0.10
Starhub	3.360	0.9	Exp	0.050	1.49	0.04
Sembcorp Marine	1.700	0.7	Conf	0.020	1.18	0.02
Total						2.99

Source: SGX, Bloomberg, please note Expected April Dividends are subject to changes.

On the interest rate side, from 15 March through 28 April 2016, the holder of a March SiMSCI Futures would be able to earn an approximate extra 0.15% or 0.48 Index points, by holding the Futures in place of holding the relevant Index stocks.

Hence as at 1:30pm, taking into account dividends and interest rates, the theoretical value for the April SiMSCI Futures was 317.16. This represented the underlying SiMSCI (319.67) plus the interest-rate carry (0.48) minus the opportunity cost of dividends (2.99).  At that time, the March SiMSCI Futures were trading almost 0.05 points higher than the theoretical value, at 317.20. 

Please note the minimum price move of the SiMSCI Futures is 0.05 points, which represents S$5.00.

Fair Value for March/April Roll

The last day of trading for the March 2016 SiMSCI Futures will be 30 March 2016, with the valuation date of 31 March 2016. Investors who wish to maintain long-term positions and roll their March position into an April position can do so in an intra-index spread market.

As noted above, the theoretical value of the April SiMSCI Futures was lower than the March SiMSCI Futures due to the dividends associated with the former. Based on the 1:30pm prices, the theoretical value for the roll was the difference between the price of the April SiMSCI Futures and the March SiMSCI Futures, which was -2.70 points. This coincided with the intra-index spread for the April and March SiMSCI Futures being bid at -2.75 and offered at -2.70.

As the March expiry draws near, the interest-rate carry will similarly decrease on both the March 2016 and April 2016 SiMSCI Futures Contracts. Any deviation from consensus expectations for dividends could also impact the theoretical prices for the SiMSCI Futures.

Recent Performance of SiMSCI Constituents

As noted above, in the year thus far, the SiMSCI has declined 0.5% compared to the MSCI World Index, which has declined 4.4% on a SGD basis. On a total return basis, the five best performing stocks of the Index were Golden Agri-Resources (+20.6%), Jardine Cycle & Carriage (+14.7%), CapitaLand Mall Trust (+10.9%), Wilmar International (+9.9%) and CapitaLand Commercial Trust (+9.9%).

The table below details the 28 stocks, and is sorted according to market capitalisation. Click on each stock to visit its profile page on SGX StockFacts.

Name	SGX Code	Index Weight %	Total Return YTD %	Dvd Ind Yld %	Price at 1:30pm	Currency
Singapore Telecommunications	Z74	13.9	3.5	4.6	3.830	SGD
Oversea-Chinese Banking Corporation	O39	12.6	1.7	4.0	8.900	SGD
DBS Group Holdings	D05	12.4	-7.8	3.9	15.370	SGD
United Overseas Bank	U11	11.2	-4.2	3.7	18.860	SGD
Keppel Corporation	BN4	4.0	-7.2	5.6	5.970	SGD
CapitaLand	C31	3.7	-6.3	2.9	3.160	SGD
ComfortDelGro Corporation	C52	2.9	-2.6	2.9	2.970	SGD
Singapore Press Holdings	T39	2.9	1.0	3.8	3.980	SGD
Singapore Exchange	S68	2.9	1.0	3.9	7.750	SGD
Wilmar International	F34	2.8	9.9	2.4	3.220	SGD
Singapore Airlines	C6L	2.8	1.3	2.4	11.400	SGD
Global Logistic Properties	MC0	2.7	-13.3	3.1	1.870	SGD
CapitaLand Mall Trust	C38U	2.4	10.9	5.3	2.110	SGD
Ascendas Real Estate Investment Trust	A17U	2.3	5.7	6.5	2.410	SGD
Genting Singapore PLC	G13	2.3	6.5	1.2	0.815	SGD
Singapore Technologies Engineering	S63	2.2	4.3	3.2	3.150	SGD
Jardine Cycle & Carriage	C07	2.2	14.7	3.0	39.670	SGD
Suntec Real Estate Investment Trust	T82U	1.8	9.4	5.9	1.660	SGD
Hutchison Port Holdings Trust	NS8U	1.8	0.8	9.6	0.500	USD
City Developments	C09	1.4	-0.9	1.1	7.550	SGD
Sembcorp Industries	U96	1.4	1.0	3.6	3.060	SGD
CapitaLand Commercial Trust	C61U	1.4	9.9	6.0	1.430	SGD
Golden Agri-Resources	E5H	1.3	20.6	1.2	0.415	SGD
UOL Group	U14	1.3	-5.4	2.5	5.870	SGD
StarHub	CC3	0.9	-7.8	5.9	3.360	SGD
Noble Group	N21	0.9	5.0	N/A	0.415	SGD
Yangzijiang Shipbuilding (Holdings)	BS6	0.9	-10.9	5.9	0.975	SGD
Sembcorp Marine	S51	0.7	-2.0	3.5	1.700	SGD
Average			1.4	4.0

Source: SGX, Bloomberg & SGX StockFacts (data as of 15 March 2016)

Please note above price are displayed in local currencies and not SGD equivalents

Futures contracts are an example of a Specified Investment Products (SIP). The MAS has introduced measures for intermediaries to safeguard the interests of individual investors investing in SIPs, which are products with features that might be more complex in nature. Investors now have the opportunity to assess their qualifications to trade SIP or enhance their product knowledge through the SGX online portal available here.