To begin with, the first product available for cross-border listing would be mutual fund units and later equities. Cross-border listing would offer better regional co-operation between financial markets of the region resulting in better resource mobilisation. Better resource allocation within the region would bring improved efficiency of scarce capital resources.

The cross-listing would provide wider choices of investment avenues to SAFE investors and to enable them to allocate their savings more efficiently within the SAFE region.

A study undertaken for a consolidated period from January 1998 to September 5, 2000 revealed that apart from the Bombay Stock Exchange (BSE), returns for all other exchanges are negative. BSE alone generated positive returns of 25.9 per cent. Using SAMF as an investment vehicle would result in lower average negative returns of 6.97 per cent, according to the study. This would protect the investors in Bangladesh, Pakistan and Sri Lanka during this period. Thus if such a fund is established, returns from different markets will act as a hedge and protect investors.

The SAFE committee should take care to ensure that there is no flight of capital, as far as possible, from one region to another. The corpus of the fund would be raised from investors of member countries and non-residents residing in the USA and Europe. There would be two different investment schemes - firstly, the international schemes, which would raise resources outside the SAFE region and secondly, the domestic schemes, which would raise resources within SAFE region.

The international schemes would raise resources with the condition that they would invest a certain percentage of resources in SAFE countries. The scheme would invest in instruments like equities, securitised debt and private capital financing. It can invest in sectoral schemes like information technology, communication and energy.The domestic schemes would invest at least 90 per cent of the resources mobilised in the SAFE region in all the above mentioned securities.