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I am very honoured to have been invited by SGX to help launch the
MSCI Index Futures contract.
Over 15 years ago, on a similar occasion, on 3 September 1986,
when I was Chairman of SIMEX, we launched the Nikkei 225 Index futures
contract. The Nikkei index then stood at 18,500 on the way to its all time peak
of almost 39,000 in December 1989. Yesterday, the index closed at 11,356.
The rise and fall of the Nikkei index has reflected the fortunes and tribulations
of the Japanese economy. For us in Asia, the bursting of the Japanese asset
bubble was perhaps the most significant phenomenon in post-war financial
market history. The Asian economic and currency crisis of 97/98 was arguably
a more dramatic episode. But, at its root, the Asian crisis could be viewed as
an after-shock from the financial earthquake in Japan.
In 1986, SIMEX was the global pioneer for trading in Japanese
stock index futures. The Osaka Stock Exchange and the Tokyo Stock
Exchange soon followed with their own futures contracts. Despite the
competition, the SGX Nikkei 225 still trades a respectable volume of about
20,000 contracts a day with open interest about 4 times the daily volume.
Without these derivative instruments, investors would have had greater
difficulty in managing and hedging their risk of investing in the Japanese stock
market. Speaking from our own experience, GIC can testify that these futures
contracts have helped us immensely in implementing asset and asset
allocation shifts in our global investment operations. GIC was an active
supporter to SIMEX in the early days of the Nikkei futures contract. GIC will
collaborate with SGX as well in trading the Japan MSCI contract. In fact, a
liquid MSCI contract will serve GIC's needs even more because we use the
MSCI global and country indices as the performance benchmarks for our
equity portfolios.
Singapore is currently in the midst of restructuring our economy to
meet the challenges ahead. The SGX derivative markets demonstrate how
Singapore can plug into the business opportunities of economic growth in
North Asia including China. The success that SGX has had with the Nikkei
contract and the MSCI Taiwan futures contract testifies to what is possible.
Global investors and financial institutions need an array of instruments and
products to enable them to invest and manage their risk in the Asian markets.
With its established infrastructure and reputation, SGX can enhance its role in
making Singapore not only relevant but important to investors and financial
intermediaries operating in the Asian markets. I hope that before long, we can
gather to launch a China futures contract.
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