Published: Mon, February 12, 2018
Worldwide | By Isabel Fisher

Singapore Exchange shares fall 8pc after Indian bourses rein in offshore trading

Singapore Exchange shares fall 8pc after Indian bourses rein in offshore trading

Shares in Singapore Exchange Ltd (SGX) fell 8 percent in early trade on Monday, on concerns its earnings will be hurt after an unexpected move by India's three main bourses to stop licensing products and data to foreign exchanges.

Stock exchanges on Friday said they would immediately stop the trading of indices of Indian securities on foreign bourses as part of a joint effort to stymie the migration of liquidity to overseas markets.

"At a time when China is working hard for inclusion in MSCI, and Hong Kong, Singapore and Malaysia continue to work to improve accessibility for global investors, Indian mandarins are still insular in their view believing compelled investors make value", said Shankar Char, senior vice president at Antique Stock Broking Mumbai.

"We have not yet had an opportunity to analyse the implications of this announcement, but it appears likely to disrupt trading on numerous exchanges around the world and alarm worldwide investors", said FIA, a leading trade association for the global listed and cleared derivatives markets.

The SGX responded in a statement that it will "take all measures to maintain orderly trading and clearing of SGX India equity derivatives for our global clients".

"Our licence agreement with NSE will ensure the continuity of listing and trading our Nifty suite of derivative products till August 2018 at a minimum", said SGX in the statement.

The exchange said on Sunday that it will develop and launch new India-access risk products. It also noted that the two companies' partnership goes back to 2000 and that they had collaborated "to develop and internationalize India's capital markets".

Interestingly, SGX also added that it will jointly work with NSE's International Exchange (NSE IFSC) in Gujarat's Gift city - India's first International Financial Services Centre (IFSC) for products for global investors. Under SGX's licence agreement with India's National Stock Exchange (NSE), there is a six month-notice period for termination.

The Singapore bourse said details for the same will be announced shortly.

The Indian Exchanges announcement comes in a highly volatile market environment, which will make MSCI investors even more sensitive to changes like this, according to trading sources. Most of the worldwide interest in India, and inflows, comes through the MSCI Emerging Markets Index (MSCI EM) given MSCI India's 9% weightage within this index, according to market reports.

MSCI EM is the global EM benchmark consisting of 24 countries representing 10 per cent of world market capitalisation.

The threat was exacerbated when the SGX said in January that it would start offering single stock futures benchmarked to Nifty 50 companies starting Feb 5.

China's unwillingness to do licensing deals with offshore markets was for years a sticking point between New York-based MSCI, which manages gauges tracked by funds with trillions of dollars in assets, and mainland authorities.

More than half of roughly 7,800 publicly traded companies in India are listed on the BSE and the NSE combined.

"If investors can't hedge their EM exposure then this impacts the status of India within the MSCI EM Index", said the sources.

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