http://www.livemint.com/2009/05/21222646/Mania-a-view-from-Singapore.html?h=B
Livemint.com, 21 May 2009
Mania: a view from Singapore
While Indian regulators halted trading on Mumbai exchanges during Monday’s euphoric rally, Nifty futures continued to trade in Singapore
Monday’s euphoric market rally in Mumbai may have petered out by now, but it has left behind some questions. It’s worth paying attention to what happened at a bourse an ocean away, in Singapore.
Since March 2008, the Singapore Exchange (SGX) has listed Nifty index futures, or contracts predicting movement of the Indian National Stock Exchange’s (NSE) index of top 50 companies. An average of 16,170 such contracts were traded daily this month, hovering around an average price of $3,262. But on Monday, the volume jumped by 325% to 51,944, with the price increasing by 18.6% to $4,370.
To some extent, these increases reflect enlarged trading in local bourses: The NSE’s Nifty itself went up 17% that day. But while Indian regulators hit circuit breakers—controls to stop trading—twice, ultimately halting trading in the Mumbai exchanges, Nifty futures continued to trade in Singapore.
That means global investors, who have equal access to bourses in both cities, may have diverted capital to make money in Singapore when they could no longer do so in Mumbai.
The nature of the circuit breaker is also worthy of note. Such controls are necessary to stabilize markets caught up in short-term mania, and it’s not as if SGX doesn’t use them. According to SGX rules for Nifty futures, Singapore imposes “cooling off periods” of 5 minutes if the price moves at least 10%. On Monday, it certainly did: Hence, traders were forced to cool off for at least 5 minutes. In contrast, in Mumbai, the first circuit breaker prompted a 2-hour cool off; the second shut down trading for good.
This raises questions for Indian regulators about capital controls. Local investors in India don’t have ready access to SGX, but global ones do; hitting the circuit breaker then puts local investors at a disadvantage, while global ones can decide within minutes where they wish to move capital to. There’s another comparative disadvantage to note: While price discovery for the Nifty continues in Singapore, it doesn’t in Mumbai.
The financial crisis has already placed larger issues surrounding the global movement of capital under the public spotlight. What happened on Monday is another matter worth examining.
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Livemint.com, 21 May 2009
Mania: a view from Singapore
While Indian regulators halted trading on Mumbai exchanges during Monday’s euphoric rally, Nifty futures continued to trade in Singapore
Monday’s euphoric market rally in Mumbai may have petered out by now, but it has left behind some questions. It’s worth paying attention to what happened at a bourse an ocean away, in Singapore.
Since March 2008, the Singapore Exchange (SGX) has listed Nifty index futures, or contracts predicting movement of the Indian National Stock Exchange’s (NSE) index of top 50 companies. An average of 16,170 such contracts were traded daily this month, hovering around an average price of $3,262. But on Monday, the volume jumped by 325% to 51,944, with the price increasing by 18.6% to $4,370.
To some extent, these increases reflect enlarged trading in local bourses: The NSE’s Nifty itself went up 17% that day. But while Indian regulators hit circuit breakers—controls to stop trading—twice, ultimately halting trading in the Mumbai exchanges, Nifty futures continued to trade in Singapore.
That means global investors, who have equal access to bourses in both cities, may have diverted capital to make money in Singapore when they could no longer do so in Mumbai.
The nature of the circuit breaker is also worthy of note. Such controls are necessary to stabilize markets caught up in short-term mania, and it’s not as if SGX doesn’t use them. According to SGX rules for Nifty futures, Singapore imposes “cooling off periods” of 5 minutes if the price moves at least 10%. On Monday, it certainly did: Hence, traders were forced to cool off for at least 5 minutes. In contrast, in Mumbai, the first circuit breaker prompted a 2-hour cool off; the second shut down trading for good.
This raises questions for Indian regulators about capital controls. Local investors in India don’t have ready access to SGX, but global ones do; hitting the circuit breaker then puts local investors at a disadvantage, while global ones can decide within minutes where they wish to move capital to. There’s another comparative disadvantage to note: While price discovery for the Nifty continues in Singapore, it doesn’t in Mumbai.
The financial crisis has already placed larger issues surrounding the global movement of capital under the public spotlight. What happened on Monday is another matter worth examining.
-------------------
Latest updates on Singapore News Alternative:
1. S'pore govt needs holistic Web approach
2. Flight Centre and SIA clash on commissions
3. Singapore, Malaysia seek to build new bridges
4. FEER Appeals Against Singapore Defamation Ruling
5. Malaysia, Singapore eye changes to economic models
6. Foreign workers lives at risk in Singapore
7. Internet Users Finding Help To Evade the State Censors
8. Singapore's Temasek defends costly Bank of America exit
9. Malaysia Proposes Third Bridge Link To Singapore
10. Professors Sir David and Birgit Lane quit Scotland for Singapore
11. Struggling CapitaCommercial to raise $573 mln in rights issue
12. Jurong Aromatics delays project till 2013 on credit crunch
13. Standard & Poor’s rates Vietnam below ‘investment’ grade
14. Singapore's Temasek explains Bank of America sale
15. Thwarted Tiger Airways considers taking local partner in Australia
16. Secular societies should be kept free from the religious right
17. Malaysian PM bids to end rows on visit to Singapore
18. SGX's Nifty Index Futures - another CLOB in the making?
New Videos Added:
1. REMEMBERING 22 SINGAPORE VICTIMS OF ISA
2. Peter Schiff Vlog Report - 21 May 2009
3. China downturn leading to Communist nostalgia - 22 May 00
4. SMU students in Guizhou for Project MAD II
. <!-- / message --> <!-- sig -->
