The stock exchanges of the BRICS emerging market bloc have formed an alliance to target the increasing number of investors seeking exposure to these leading developing markets. Initially, the exchange alliance will cross-list benchmark equity index derivatives on each of the other alliance members. In the second phase, it will develop innovative products to track the BRICS exchanges.
Interest in the BRICS economies is prompted by above-average growth predicted for these regions, as well as the rising consumer power generated by growing middle classes in each nation.
The alliance, announced today at the 51st annual general meeting of the World Federation of Exchanges in Johanesburg, South Africa, brings together BM&FBOVESPA from Brazil, MICEX from Russia (currently merging with RTS Exchange), Hong Kong Exchanges and Clearing Limited (HKEx) as the initial China representative and the Johannesburg Stock Exchange (JSE) from South Africa. The National Stock Exchange of India (NSE) and the BSE Ltd (formerly known as Bombay Stock Exchange) have signed letters of support and will join the alliance after finalizing outstanding requirements. These seven exchanges represent a combined listed market capitalization of $9.02 trillion equity market trading value/month and 9,481 companies (figures sourced from the World Federation of Exchanges and RTS websites as at end-August 2011.
Global investors are increasingly seeking exposure to leading developing markets, said Ronald Arculli, chairman of HKEx and of the WFE. The close relationship of the BRICS stock exchanges is behind this initiative, through which investors worldwide will gain easier access to benchmark equity index derivatives which will now be offered in local currency on these exchanges.
This is an important moment in the history of developing countries, added Arculli. The alliance enables more investors to gain exposure to the BRICS bloc of emerging economies, with its increasing economic power. From a global perspective this alliance points to the growing relevance of the BRICS economies and financial markets in the coming decade and further underlines the reason for the BRICS relationship.
The cross-listings are planned to take place by June 2012.
The second phase will also include the development of products combining exposures to equity indices of all alliance partner exchanges. These products would then be cross listed and traded in local currencies, says Edemir Pinto, CEO of BM&F BOVESPA. They will also allow investors to gain exposure to other emerging markets through a locally listed product.
Products to be developed in the second phase will include ETFs.
The third phase may include product developments and cooperation in additional asset classes and services.
Madhu Kannan, CEO of BSE Ltd, added: The BRICS exchanges alliance holds great promise, as it will create avenues for Indian investors to diversify and expand into other emerging markets. It will also provide unique opportunities to investors in other BRICS nations to participate and contribute in Indias growth. BSE will actively work towards bringing world-class products to India as well as developing new products for other BRICS markets.
(JDC)