Exchanges in the biggest emerging economies started trading futures based on each other's benchmark stock indexes yesterday, with rising wealth spurring demand for new investment products.
The BRICS Exchanges Alliance would cross-list futures on Brazil's Bovespa Index (IBOV), Russia's Micex Index (INDEXCF), the BSE India Sensitive Index, Hong Kong's Hang Seng Index, the Hang Seng China Enterprises Index (HSCEI) and South Africa's JSE Top40 Index. Traders engaged in arbitrage would be able to buy and sell futures based on the same index on multiple venues, boosting liquidity, Mumbai-based BSE Ltd said.
The products would appeal to a growing number of wealthy individual investors in developing nations who wish to access foreign markets, according to Bruce Weber, dean of the Lerner College of Business and Economics at the University of Delaware in Newark. Per-capita gross domestic product in emerging markets had risen 104 per cent during the past decade to about $6,980, the Washington-based International Monetary Fund said.
According to Weber who spoke to Bloomberg in a phone interview, the exchanges were doing well in local markets and wanted to be seen as international for their local investors, who could then go to another BRIC country easily. He added that BRIC countries had generated a lot of growth for investors.
The grouping links Brazil, Russia, India and China -- nations identified by the acronym BRIC in 2001 by Goldman Sachs Group Inc's Jim O'Neill, representing countries the New York- based bank predicted two years later would join the US and Japan as the world's biggest economies by 2050 -- with South Africa.
The first summit of the BRIC nations was held in 2009 and the group invited South Africa to join in December 2010.