Singapore to offer PSE-indexed futures

INVESTORS may soon be able to trade Philippine Stock Exchange-indexed futures—in Singapore, that is.

Singapore Exchange Ltd. (SGX) plans to add equity-index futures on the Philippines and Thailand to offerings that currently include Nikkei 225 Stock Average and Indian contracts, newswire Bloomberg reported on Friday, quoting an interview with SGX president Muthukrishnan Ramaswami.

Derivatives account for 25 percent to 28 percent of SGX’s total revenue, the report said.

“The introduction of Philippine equity index futures is broadly positive as it will spur more liquidity to the underlying market. It will also allow investors to hedge their long positions without selling outright,” said Paul Joseph Garcia, senior vice president and head of Odyssey Funds at Ayala-led Bank of the Philippine Islands. “It will broaden the investor base just like in the more developed markets where index futures are available to investors.”

A futures contract allows investors to bet on the direction of an underlying commodity, currency or index in a formal exchange, allowing hedgers and speculators to trade.

“I think that is generally good since it will give additional visibility and also liquidity in trading Philippine companies. It will also give another perspective of how foreigners view the Philippine market,” said Marvin Fausto, chief investment officer at Banco de Oro Unibank.

Adding Philippine and Thailand equity-linked index futures should be seen as being part of SGX’s strategy to build a sizable and healthy derivatives market in emerging Asia, said Jose Mari Lacson, head of research at Campos Lanuza & Co.

“This is a huge market in Europe and in the US and is the main reason why leading exchanges in the world are consolidating—to build even bigger OTC (over-the-counter) derivative markets,” he said.

Lacson said this thrust of SGX would have two implications for PSE. First, in terms of product development, he said the local exchange was “so far behind its regional counterparts.” Secondly, he said the PSE should consider merging or partnering with a major regional or global exchange (such as the SGX) “to help it leap-frog its business development.” Doris C. Dumlao