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Officials from the Bombay Stock Exchange (BSE) approached counterparts at the US bourse last year to discuss the possibility of creating US dollar-denominated futures contracts and, in November, the two parties signed a licensing agreement. That deal paved the way for US investors to take part in the booming Indian equity market without the need for American depositary receipt authorisation.
Since then the US exchange, which is making its first foray into Asia, has been busy developing the product for clients in the US û mostly hedge funds, institutional investors and mutual funds. "We've undertaken a massive sales campaign to end users," says John Spiegel, the deputy chief executive of USFE. "In some ways it's been an easier sell than we'd expected because of the strength of the Indian economy, and Asia in general."
The Sensex rose 47% in 2007, compared to a meagre 6.5% on the Dow, and is up more than 600% since its low in May 2003 û although the performance this year has been less compelling, with the Sensex giving up 20% compared to 5% on the Dow.
Even so, the subprime turmoil in the US has also spurred interest in Asian equities markets, says Spiegel, and the uncertainty has caused volumes in the futures markets to spike as investors try to hedge their positions against further share price volatility.
Spiegel says this opportunity with the BSE was something of a one-off, but does not rule out the possibility of further tie-ups in other Asian markets. "We have no existing plan to reach out to other exchanges but are always interested in developing other products that allow our clients to offload risk," he says.
The USFE is based in Chicago and was formed in 2006 as a result of Man Group's investment in the former Eurex US. The Sensex futures contracts will trade 23 hours a day, with a notional value of 40,000 index units and the minimum price change is $10.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
Insto roundup: GPIF staff say J-Reits more attractive than traditional assets; Hong Kong's strict Spac criteria
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.