Trading ban hits Singapore exchange
Singapore: Shares on Singapore Exchange Ltd (SGX) fell as much as 9 per cent on Monday as brokers cut their earnings estimates after India's three main bourses stopped licensing their indices and securities to foreign exchanges.
The unexpected decision to prevent trading from migrating abroad will especially hurt SGX's Nifty 50 index futures, which is the exchange's flagship Indian equity derivatives product and accounts for about 12 per cent of its total derivatives trading volume.
The Washington-based Futures Industry Association (FIA) has said it will seek discussions with the Indian exchanges about their decision.
"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 international investors," said the FIA, a leading trade association for the global listed and cleared derivatives markets.
"SGX's edge and key proposition to clients was the ability to invest in multiple Asian derivatives products in one venue," Goldman Sachs' analysts said in a report.
"With the loss of the Indian product, there could be lower volumes in other derivatives products," Goldman said. It cut its rating on SGX to "sell" from "buy" and reduced earnings estimates by up to 11 per cent for 2018-20.
JPMorgan downgraded its "overweight" rating on SGX and UBS placed its "buy" rating under review.
SGX held a call with analysts on Sunday to discuss the implications of the sudden move and said the termination of the licence was not expected to have any impact on its immediate financial results. Agencies