Standard & Poor’s has announced the launch of two real-time currency indices on Indian and Chinese currency that provide investors with exposure to emerging economic superpowers that currently lack a liquid currency futures market. The S&P Indian Rupee Index and the S&P Chinese Renminbi Index are the first in what will be a series of real-time currency indices launched by Standard & Poor’s in 2008.
S&P is the first index provider to offer this type of index on a global basis. S&P is the first major index provider to venture into the Currency Beta space – another sign of S&P’s breadth of asset class coverage. Neither market has liquid currency futures, so S&P has innovated by using non-deliverable forward contracts.
The indices will provide information on the currencies and the costs of hedging positions in a convenient and consistent form. Given the appreciation in currencies of these two trading powers, these indexes and index-linked products will provide a transparent hedging mechanism for trade participants in the local markets. A Chinese or Indian exporter sells services to US in dollars.
If the rupee or yuan rises, they suffer. Now they can hedge in a exchange listed, transparent framework without worrying about futures markets, liquidity of contracts, over-the-counter transactions etc. This is the first ever way for US retail investors to get access to currencies of two emerging economic superpowers – China and India.
The China index will be the first time US retail investors will have exchange listed acto a local Chinese asset.
