PrimePartners Mulls ETF For SGX-Listed China Shares Index
SINGAPORE (Dow Jones)--PrimePartners Corporate Finance Pte Ltd., which has launched an index of 25 Singapore-listed Chinese companies, plans to eventually develop futures contracts and an exchange-traded fund based on the index.
"We are in discussions with market participants to interest them in financial instruments (such as) futures contracts, warrants, and possibly even an exchange traded fund," said PrimePartners chairman Quek Peck Lim at a briefing.
The PrimePartners China Index is a value-weighted index of 25 China-owned and managed companies listed on the Singapore Exchange.
Its top five component stocks, comprising 55.7% of the index's total market capitalization, are Cosco Corp Singapore Ltd. (P83.SG), Pine Agritech Ltd. (P39.SG), People's Food Holdings Ltd. (P05.SG), Celestial Nutrifoods Ltd. (C56.SG), and Midas Holdings Ltd (5EN.SG).
The companies were selected on the basis of market capitalization, trading volume, industry representation, the total number of issued shares, and free-float percentage.
In the January to September period, the index would have gained 26.9%, compared with an 8.4% gain on the Straits Times Index.
In an interview with Dow Jones Newswires, Quek said PrimePartners is working with the Singapore Exchange and "market intermediaries" such as Macquarie Bank and Deutsche Bank to set up futures contracts and other financial instruments based on the index.
Quek said these instruments wouldn't be introduced this year.
Asked if corporate governance was a factor in selecting companies, Quek said China Aviation Oil (Singapore) Ltd. (G92.SG) wasn't included in the index despite having a large enough market capitalization "because it had problems of its own."
China Aviation nearly collapsed in 2004 after racking up about $550 million of derivatives trading losses which it concealed.
Quek said qualitative factors such as corporate governance would become more important when the index components are reviewed in the future.
Bio-Treat Technology Ltd. (B22.SG), a Chinese water-treatment company which posted a surprise loss of CNY66.5 million in the three months to June 30, and has been labeled by analysts as lacking in transparency, is the sixth largest component on the index.
The PPCI is currently carried by Reuters Group PLC, and will be available on the SGX Web site from Monday.
PrimePartners is in discussions with other media, such as the local business daily Business Times and Bloomberg LP, to publish the index.