Singapore Exchange Decreases as India Futures Spat

On early trading Monday, Singapore Exchange Ltd. stock went down the most since November 2008 as investors responded to the move of National Stock Exchange of India Ltd. to end its licensing agreement with the Lion City bourse.

Stocks of Singapore Exchange Ltd. decreased on early trading.

Last Friday, NSE and other Indian markets stated that they would end all licensing deals with their foreign counterparts, and stop offering live prices to overseas venues. The steps would make it impossible for SGX to keep offering derivatives based on India’s benchmark Nifty 50, among its flagship products.

Singapore has turn into a center of offshore trading for many markets. The significance move of India was highlight by several analyst notes published after the announcement of India, with at least three banks cutting their rating on the exchange operator’s stock. The shares of the company dropped as much as 8.8 percent in early trading, and saw the biggest decline on the benchmark Straits Times Index.

“NSE’s decision could result in at least a 4 percent cut to SGX’s total revenue,” Sharnie Wong, a senior industry analyst, stated. Nifty-related products if SGX were accounted for about 10 percent of its total derivatives revenue in the first half of its fiscal year, according to the analyst.

According to the people familiar with the matter, the move of India came after SGX launched its single-stock India futures on February 5. Officials of NSE had sought a delay of those products.

“Probably as individual stock futures were being introduced on SGX, the Indian side became paranoid and hence this knee-jerk reaction,” a senior managing director at Aquarius Investment Advisors Pte. in Singapore, A.S. Thiyaga Rajan, stated.

The weekend’s developments will not impact the Indian single-stock futures, which are not based on licensed market data from the Indian exchanges, according to the letter Sue Lin Lim, DBS Group Research analyst, wrote.

Meanwhile, the shares of SGX went down 7 percent, trading at S$7.34.

Yesterday, SGX wanted to defuse the tension with India in a statement. SGX said that it will work with NSE “toward solutions for global investors,” and noted that the partnership of the two companies goes back to 2000 and that they had work together “to develop and internationalize India’s capital markets.”

SGX also said that the move of NSE would not have a material impact on its “immediate” financial results.

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