As Singapore and India fight over futures, investor worries grow
What started as a business disagreement between two Asian exchanges has become a source of growing concern for international investors.
A fight between Singapore Exchange and National Stock Exchange of India over derivatives contracts is threatening to end a popular way of hedging Indian shares.
The battle, which went to court in Mumbai this week, has left traders scrambling to find new ways to manage their exposure to the US$2.3 trillion market, one of Asia’s biggest.
The dispute broke into the open in February after NSE said it was axing licensing agreements with overseas bourses.
India is trying to discourage offshore trading and promote a tax-free trading zone in Prime Minister Narendra Modi’s home state, part of a broader effort by Asian nations to keep control of capital while further integrating into the global financial system. That’s not a combination that appeals to money managers.
“The moves do not help and it sends a wrong signal to the investing community,” said Salman Ahmed, London-based chief investment strategist at Lombard Odier Investment Managers. “You want to open your capital account incrementally, and for foreigners to invest in your very young population. This is a very bad signal to give.”
NSE and SGX first clashed in January, when the Indian bourse asked its counterpart to delay plans to introduce single-stock futures that would track some of the subcontinent’s largest companies.
SGX ignored the request, and a week later India’s three national exchanges said they’d cancel their offshore pacts, which meant that Singapore could no longer offer Nifty 50 Index futures.
“The battle is more about control and volumes,” said Vik Mehrota, chief executive officer of Venus Capital Management Inc. in Boston, who has been investing in India since 1994. “This is a self-preservation move by NSE. This is an unnecessary fight.”
Officials from NSE and SGX declined to comment.