The Singapore Mercantile Exchange (SMX), slated to begin operations in about nine months, will offer futures and options trading in Asian time zone on precious metals, base metals, energy, agricultural commodities, currency pairs, carbon credits and commodity indices.
The announcement was made at the glitzy Global Financial Market Summit 2008, graced by Mr. Jignesh Shah (Chairman of Financial Technologies) and Mr. Lim Hng Kiang (Deputy Chairman of the Monetary Authority of Singapore and Minister of Trade and Industry).
As yet, there are no single platform in Asia which caters to such a diversified range of products. SMX aims to be Asia’s commodity hub by captializing on the current global commodities frenzy. Investors are hedging their risks from a weak US dollar, inflation and declining stocks.
While SMX still needs approval from the MAS, I don’t think there are much hindrances to its setup. There are concerns about excessive speculation which could lead to a bubble in the commodities markets but Singapore government, being ever pragmatic, will not say no to money making opportunities. Make money first and take care of the ill-effects later.
That is the same reasoning behind the approval for our two integrated resorts (aka casinos). The government recognizes the social ills of gambling but economic growth and jobs creation take precedence over ethical issues.
Another official statement is, if we don’t do it, others will, and this will erode our long-term competitiveness. Among SMX’s closest rivals are Tokyo, Hong Kong and Shanghai. In fact, Hong Kong’s Mercantile Exchange plans to begin trading oil contracts in the first quarter of 2009.
It will take time though for any exchange to come into prominence as liquidity and interest in trading are needed before new contracts can be set up.
Certainly, the race is heating up for the leading position in the Asian commodities market. Stay tuned for more updates.