Market performance in Q3 2018 was mixed. While in the Americas region strong economic results and growing corporate profits in the US boosted markets, in Europe, tensions with respect to a trade war with the US, banking sector exposure to vulnerable emerging markets and the uncertainty stemming from Brexit negotiations were among factors affecting market sentiment. In the Asia-Pacific region, a weaker currency in Japan drove up the benchmark indices, while in China benchmark indices fell in the presence of continuing trade tensions with the US and a slowdown in economic growth. Q3 2018 was a volatile quarter for emerging markets, while there were some bright spots, several markets saw declining valuations due to concerns about weak macroeconomic performance and the spill-over effects of evolving global trade policies among others.
In this article, we look at the performance of global equities and derivatives in Q3 2018 as compared to the same period in 2017. We also compare market activity in Q3 2018 with activity in the preceding three months (Q2 2018).
Domestic Market Capitalisation
- Overall domestic market capitalisation at the end of Q3 2018 was up 5.1% on end Q3 2017. This was entirely driven by a 15.3% increase in market capitalisation in the Americas region. In the Asia-Pacific and EMEA regions, market capitalisation was down 2.8% and 1.6% on end Q3 2017.
- The overall market capitalisation at end Q3 2018 was only slightly different than the value at end Q2 2018 (1.4% higher).
Value and volumes of trades
- Value of trades in equity shares was down (-3.6%), while volume traded was slightly up (+1.5%) on Q3 2017. Only the Asia-Pacific region experienced a decline in both value and volumes traded on Q3 2017 (down 24.3% and 3.2% respectively).
- When compared to Q2 2018, Q3 2018 was a relatively quiet quarter in terms of trading activity. Both value and volumes traded were down (-13.4% and -6.3% respectively), due to declines in both metrics of market activity across all three regions.
IPOs - New listings and Investment flows
- New listings through IPOs were down 9.1% on Q3 2017, with only the Americas region recording an increase in the number of new listings through IPOs (up 54.3%). In the Asia-Pacific and EMEA regions, the number of IPOs fell by 17.9% and 24.4% respectively. Investment flows through IPOs however, increased by 21.8% on Q3 2017 due to increases in Americas and Asia-Pacific regions (up 67.1% and 58.4%), while in the EMEA region IPO investment flows fell by 58.6%.
- When compared to Q2 2018, while total new listings were down (-5.4%), overall investment flows through IPOs increased (12.3%).
- Volumes of single stock options traded were up 18.2% on Q3 2017. This was due to increase in volumes across all three regions: the Americas region was up 21%, the Asia-Pacific region up 11% and the EMEA region up 2.2%. Overall Q3 2018 volumes were also 2.8% up on Q2 2018.
- Volumes of single stock futures were up 36.3% on Q3 2017, driven by significant increases in the Asia-Pacific (+40.3%) and EMEA regions (+30.4%), where over 99% of the total volumes are traded. Overall volumes were down on Q2 2018 (-21.9%).
Stock index options volumes were up 11.1% on Q3 2017, with only the Americas region experiencing a 11.1% decline in volumes. Overall Q3 2018 volumes were 2.8% up on Q2 2018.
Stock index futures volumes were up 23.2 % on Q3 2017, driven by increases across all three regions: the Americas region was up 32.5%, the Asia-Pacific region up 26.6% and the EMEA region up 7.4% respectively. Overall Q3 volumes were however lower than total volumes traded in Q2 2018 by 6.1%.
- Volumes of interest rate futures which account for the bulk of the interest rate derivatives volumes (83%) were slightly up (+2.4%) on Q3 2017. However, when compared to Q2 2018, volumes traded were significantly lower (down 16.9%).
Interest rate options volumes which account for a smaller share of overall interest rate derivatives volumes were up 1.5% on Q3 2017 and but down 14.5% on Q2 2018.
Currency futures recorded a significant increase in volumes traded (+34.8%) on Q3 2017, driven by increases in volumes across all three regions: the Americas region was up 31.1%, Asia-Pacific region up 74% and the EMEA region up 0.5%. Overall volumes traded were also higher than in Q2 2018, up 9.1%.
- Volumes of currency options in Q3 2018 were also higher than the volumes traded in Q3 2017 (+63.7%) and Q2 2018 (+57.2%). These increases were driven by the Asia-Pacific and EMEA regions where over 95% of the volumes are traded.
Commodity futures volumes were up 4.5% on Q3 2017, entirely driven by the increase in volumes traded in the Asia-Pacific region (up 13.1%). The Americas and EMEA regions saw volumes decline by 4.7% and 10.2% on Q3 2017. Overall Q3 volumes were however 5.4% lower than Q2 2018.
- Similarly, commodity options (which account for just over 4% of the overall commodity derivatives volumes) recorded higher volumes traded in Q3 2018 in comparison to Q3 2017 (+8.8%) but lower volumes in comparison to Q2 2018 (-11.3%).
Exchange Traded Funds (ETFs)
- In Q3 2018, both volume and value of trades in ETFs were up 18% and 15.3% respectively on the same period in 2017, driven by increases across all three regions.
- Both volume and value of trades in Q3 2018 recorded a decline when compared to Q2 2018, due to declines in both metrics across all three regions. Volumes traded were down 10.8% on Q2 2018 while value traded was down 16%.