Investments coming from BRICS exchanges

Discussion in 'Economy & Infrastructure' started by SpArK, Oct 12, 2011.

  1. SpArK

    SpArK SORCERER Senior Member

    Oct 24, 2010
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    Investments coming from BRICS exchanges


    12 October 2011

    JOHANNESBURG - From next year, investors worldwide will be able to trade in indices representing stock exchanges in Brazil, Russia, India, China and South Africa (the Brics countries).

    Seven major stock exchanges in the Brics countries have formed an alliance to help investors increase their exposure to the world’s most dynamic economies.

    Initially the exchanges will cross-list benchmark equity index derivatives on each member’s boards. That should start in the first half of 2012. The exchanges represent 18% of world trade in listed derivatives.

    Speaking after the 51st AGM of the World Federation of Exchanges in Johannesburg, JSE president Russell Loubser said SA institutions need to diversify geographically and have a strong appetite for such products.

    Each of the products will be traded in the local currency of the constituent countries, so there will be no impact on the foreign reserves of the five countries. The alliance will not place pressure on the finance ministers of India and SA to further lift exchange control.

    Any investment in these products will fall outside the R4m per family foreign exchange limit in SA. Loubser said certain big stocks, such as Berkshire Hathaway and Apple, are already listed on the JSE and traded and settled in rands. Administration of the index funds will be no more difficult.

    A common index representing all the exchanges is possible. Loubser said the JSE has a market capitalisation of $1trn. Hong Kong is valued at $2.9trn, Brazil at $1.5trn, the two Russian markets at $1trn and India at $1.5trn, for a total of $7.9trn. The JSE would thus constitute less than 12.5% of any joint index.

    No business entity will be formed. There will be no CEO, corporate office, or separate IT system.

    The announcement was made jointly by the following exchange officials in Johannesburg:

    • Charles Li, chief executive of HKEx
    • Edemir Pinto, chief executive officer of BM&F BOVESPA from Brazil
    • Ruben Aganbegyan, president of MICEX from Russia
    • Roman Goryunov, chief executive of RTS from Russia
    • Russell Loubser, chief executive officer of Johannesburg Stock Exchange
    • Madhu Kannan, chief executive officer of BSE Ltd
    • Ravi Narain, managing director & chief executive officer of the National Stock Exchange of India

    Hong Kong, initiator of the alliance, will represent China initially.

    The two mainland exchanges, Shanghai and Shenzhen, are to be invited to join the alliance, said Charles Li, CEO of the Hong Kong exchange.

    Pinto of Brazil said the new products of the alliance will improve access to fast growing emerging markets. He expected south-south trade and investment to grow anyway and this alliance was a natural outcome.

    Goryunov said many large Russian firms were listed on a number of stock exchanges to get easier access to capital. This alliance could in the long run be helpful to them.

    There is a desire between the parties to be able to offer Brics as an asset class but this will take some development and may come up in phase three.

    Loubser said SA was flattered to be involved in such a “meeting of giants”. He said second phase products could be futures and options contracts on individual indices, such as the FTSE JSE40.

    The Brazilian and Russian representatives confirmed a strong appetite for these types of investment products from banks and institutions.

    Loubser said each of the bourses in the alliance should list their ten biggest companies on the JSE.

    The Hong Kong Economic Journal asked if the various exchanges were considering equity investments or even mergers and takeovers in the wake of the alliance.

    “I think we are running ahead of ourselves”, said Li of the Honk Kong Exchange, which is involved in a bid for the London Metal Exchange.

    That said, “the alliance is not like Nato. There is no non-aggression pact, no defence pact, no anti-takeover rules”.

    Sexy investments coming from Brics exchanges - Investment Insights | Moneyweb

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