China’s Stock Market Crashes… AGAIN: What Companies Might Win From This?

Earlier today at 9:59 am, the Chinese stock market halted trading for the day for the second time in a week. This came after the CSI 300 Index, an important benchmark for Chinese stocks, fell more than 7% in the session and triggered automatic circuit breakers.

Today’s trading halt in China is similar to what happened on Monday. Back then, Chinese stocks also plunged more than 7%, leading to the market there closing for the day by early afternoon.

Singapore’s market barometer, the Straits Times Index (SGX: ^STI), has fallen today as well and is down by 2.1% as of 1:00 pm. Companies in the commodities space appear to have been hit particularly hard.

For instance, commodities trader Noble Group Ltd  (SGX: N21) had seen its share price get slashed by 7.9% to just S$0.35 per share (as of 1:00 pm). Coming behind Noble is palm oil producer Golden Agri-Resources Ltd (SGX: E5H) – the company’s shares had declined by nearly 6% to S$0.325 (as of 1:00 pm).

The businesses of both Noble and Golden Agri-Resources deal with commodities that are highly dependent on demand from China. And so, worries about a slowdown in China’s economic growth and signs of overcapacity in many industries there are likely to be weighing on investors’ minds at the moment when it comes to both firms. Volatile financial markets in China may have increased those jitters.

Interestingly, such wild volatility might actually benefit one company in Singapore’s stock market and it is none other than the bourse operator Singapore Exchange Limited (SGX: S68).

According to a market update published yesterday by Singapore Exchange, the company now offers six structured warrants that allow investors to leverage on China A50 futures prices. In the first two trading days of 2016 alone, the six warrants have already accounted for a total traded value of S$1.6 million.

Given that there are no signs of sustained improvement in the economy of China at the moment, the volatile conditions in the Chinese stock market might not subside anytime soon, which may be a positive for Singapore Exchange as described earlier.

Meanwhile, the performance of the Chinese stock markets might even have spill-over effects on stocks traded in Singapore. Any possible increase in trading volume from that source is likely to benefit Singapore Exchange as well as part of its fees are generated from trading activities in the market.

Foolish Summary

Regardless of how the economy or stock market is doing, there may always be winners and losers in the world of business. In the case of our current volatile market environment, it seems that the messier the conditions are, the better it might be for a company like the Singapore Exchange.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.