By: DanielXX

Derivatives, and warrants in particular, have become very popular instruments on the SGX over the past few years, and the SGX must be given credit for its successful promotion of this instrument the second time round (the first attempt in the 90s fizzled out). As more and more issuers enter as market-makers, there is now a critical mass and warrants form a substantial part of market trading volume.

For shorting in particular, exposure via derivatives is the cheapest method of all the alternatives, and the main instruments are index futures and put warrants. Cheap because there are no ridiculous financing costs as in the case of CFDs or SBL, although there still exist time expiry for both instruments.

Index futures on the SGX are offered for several North Asian markets and of course the local market, among which the Hong Kong index futures has become wildly popular due to its strong bullishness. Futures are very simple. You either go long (ie. bullish) or short (ie. bearish); the contract parties are the longist and the shortist. Typically both parties only have to put up a small amount of equity, but margin top-up is required when positions move against one of the parties. It is a useful instrument if one wishes to take a short position on an entire market, though he’d better be familiar with the index components!
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Short-selling Series
Short-selling Part 1
Short-selling Part 2
Short-selling Part 3