Singapore Exchange and Thomson Reuters Announce Singapore Dollar Based Bond Indices

One of Asia’s largest exchanges for securities and derivatives, the Singapore Exchange (SGX) has announced together with Thomson Reuters, a leading provider of information services for businesses and professionals, the launching of a series of Singapore Dollar (SGD) Bond Indices, offering investors a new way to gain exposure to the Singapore dollar, and Fixed income markets which have been growing exponentially for the last 10 years.

The announcement was jointly released yesterday, and ahead of Thomson Reuters' November FX Volumes that Forex Magnates had reported, and follows as Singapore became the 2^nd largest trading hub for Foreign Exchange, as ranked in the latest Triennial survey FX Markets (by the BIS). Since the indices are all Singapore dollar-denominated, this allows global investors exposure to the Singapore dollar - a leading non-G8 currency, as inflows to bonds are expected to continue.

As per the official release, the new set of SGD-based bond indices are designed to meet the benchmarking needs of fund managers, custodians and portfolio managers who can track five years of historical data as well as forward testing, when constructing strategies or products derived or calculated from the indices. This can also offer market participants a powerful gauge of fixed income returns across a wide variety of segments.

Available through Eikon Platform

The official press release stated that the new suite of indices will be available on Thomson Reuters' Eikon platform, the company’s next-generation solution and successor to older Thomson Reuters products that are planned to be phased-out as Eikon is expected to stream-line desktop terminal offering. Index levels will also be available for free to Datastream customers and constituent information will be distributed via various industry standard feeds and ftp formats, as per the official press release. Thomson Reuters appears to be continuing to focus on growing its efforts in Asia, as previously reported.

Forex Magnates' reporters spoke with Sanjeev Chatrath, Managing Director, Region Head - Asia, Financial & Risk at Thomson Reuters, who has been quoted in the official press release, he explained with regards to how this new launch relates to currency trading and said to us, “This new index will serve as a reliable and independent benchmark for fund managers, issuers and investors in general as they seek alternative investment tools to manage their exposure in Asia markets and currencies. With the rapid increase in bonds being issued in Singapore – including from overseas companies – all types of investors will be looking for exposure to Singaporean debt.”

Forex Magnates had previously covered the SGX's launch of Currency Futures as the Exchange aimed to expand its foothold in the region in FX, with the latest news of the sale of the Singapore Mercantile Exchange (SMX) to global exchange conglomerate ICE. With a prudent regulator, the Monetary Authority of Singapore (MAS) is taking steps to oversee local financial markets, and wealthy investors in the region are partaking in local and international portfolio allocations.

Betting on Singapore

An increasingly sought after hub for establishing investment companies and financial services operations, Singapore continues to be a major destination choice for capital markets companies looking to expand within Asia.

Commenting in the official press release, Mr. Muthukrishnan Ramaswami, President of SGX said , “Asian companies are listing a record amount of bonds on Singapore Exchange and we are the listing venue of choice for any fixed income deals that take place in Asia.”

Mr. Ramaswami added in the official announcement, “With the launch of the bond indices we aim to increase transparency and improve the price discovery process for investors. This is another key milestone for both retail and institutional investors seeking diversified multi-asset exposure through the Singapore market.”

The construction of any index with regards to its pricing mechanism and methodology is a key defining element that effects both its behavior and permitted functions. According to the official press release, the Thomson Reuters/SGX Singapore Fixed Income indices are based on bonds that have been priced objectively and independently by the Thomson Reuters Evaluated Pricing Service (EPS), a time-specific assessment of the fair market value of each bond.

Constructing Indices

This method, according to the description by Thomson Reuters, provides better indicative prices as compared to composite or contributed prices that may be out of date, which also makes these indices ideal for the creation of index-based investment products such as Exchange Traded Funds which seek to provide specific investment access to Singapore debt.

Indices like these can also be used by an online brokerage to create a synthesized contract for difference (CFD) or similar OTC derivative, including bench-marking automated trading strategies.

While fixed income products have not been the most popular of instruments chosen by online traders when compared to say FX markets, the advent of multi-asset trading platforms may support the convergence of such asset classes into the average retail traders field of vision. Especially as Sovereign & Corporate Bonds constitute a significant role and market share of capital markets, and interest rate fluctuations provide speculative access to risk.

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