Singapore launches new index for regional stocks

Singapore launches new index for regional stocks

SINGAPORE (Reuter): Singapore launched a new regional share index yesterday in an effort to boost its position as one of Asia's top equity trading centers.

Announcing the new index, Finance Minister Richard Hu said the Stock Exchange of Singapore (SES) had recently attracted a large number of foreign companies, which now represented about 25 percent of the market's total capitalization.

He said the Business Times Singapore Regional Index (SRI), which has 38 component stocks ranging from shipyards and electronics firms to finance and telecommunications companies, would be a clear benchmark to measure the performance of Asian regional investment portfolios.

"This reflects the increasing international dimension of the Singapore stock market," Hu told a ceremony to launch the index.

Hu said the combined market capitalization of the five Southeast Asian stock markets of Indonesia, Malaysia, Thailand, the Philippines and Singapore had risen from about 40 percent of gross domestic product (GDP) in 1990 to 120 percent last year.

Gains in the respective price indices of the exchanges have also exceeded 50 percent in most cases.

Hu said the Singapore government would also introduce a range of other measures to help promote Singapore as a center for international securities trading and investment management.

With immediate effect, foreign companies meeting certain criteria could apply to the Monetary Authority of Singapore to convert or list their shares in Singapore dollars, he said.

The criteria included having more than 35 percent of revenue, profits or expenses attributable to Singapore operations, and having senior managers responsible for the business located in Singapore.

Hu also said the SES was reviewing the structure of the local stock options market to open participation in it to firms that were not members of the SES, and was working with banks to allow quotation of unit trusts.

The SES said in a statement the new regional share index would be weighted by market capitalization and would only include large firms with a high exposure to regional markets.

Of the 38 SRI stocks, 24 are quoted in Singapore dollars and 14 in U.S. dollars. Seven of the components are the foreign tranches of Singapore companies which have both local and foreign tranche listings.

Hu said the Singapore International Monetary Exchange (SIMEX) would study the index's performance to evaluate the feasibility of introducing a futures contract based on it.

He said six Singapore banks would jointly sponsor a unit trust to invest exclusively in the SRI component stocks.

Analysts said the package of measures would help boost trading in the shares of foreign firms listed in Singapore.

They said the new index should help companies such as Hong Kong-based conglomerate Jardine Matheson which had not been included in a major stock index since it switched its primary listing to Singapore from Hong Kong two years ago.

"It offers companies which are currently not on any index an exposure. That's important," said Michael Tan, research manager at local brokerage Lee & Co.

Inder Bethal Singh Thakral, managing director of electronic goods distributor Thakral Corp Ltd, which is one of the new SRI components, said he thought his company would benefit from being included in the new index.

"The investor public will get more chance to look at it now and look at it more from a regional perspective," he said.

Thailand, Indonesia

Meanwhile, Morgan Stanley Capital International said in a statement that its Capital International Perspective SA is to develop Free Indices for Thailand and Indonesian stock markets.

"The existing MSCI Thailand and MSCI Indonesia indices are calculated using local prices. However, for many securities these prices do not reflect the real conditions prevailing for international investors who must buy on the Foreign Board once the maximum foreign ownership ceiling has been reached," MSCI said.

The foreign board demands premiums over the local stock.

The MSCI indices are used by fund managers to allocate assets and track performance.