The Singapore International Monetary Exchange (Simex)
announced on 27 April 1998 that it would launch in August a
stock index futures contract based on the Singapore stock
market. In addition, it also plans to come up with two more
stock index futures contracts, one on the Thai stock market,
and the other on the Malaysian stock market. This means, very
soon, small investors who have a view on the broad movements
of these three markets will be able to put their money where
their beliefs are.
Quite a number of people would still remember the collapse
of Barings Group in the hands of rogue futures trader Nick
Leeson. Some of them may associate words such as "speculation",
"futures", "Leeson" more with gambling than with financial
centres. While such a view may be difficult to change, we should
quickly point out that a financial derivative that can be used
for speculation can also be effective hedging tools.
To make a point, let me repeat a known fact about the
German tennis player Steffi Graf. When Graf was in the final
rounds of major tournaments, her father was known to bet against
her. Some sports journalists speculated that the senior Graf
was superstitious. But I believe that he was simply hedging.
The winning from the bet would definitely dull the anxiety when
Graf was on the verge of being defeated. Of course, the joy of
victory would also be dampened by the loss on the bet. But then
how often do we hear people who have survived a term insurance
say: "I should not have bought the insurance!"
This series aims to enhance small investors' understanding
of the stock index futures in general and the Simex MSCI
Singapore Stock Index Futures contract in particular. Selected
issues related to stock index futures will be discussed. They
are outlined below and will appear in the following sequence:
*Speculating with Stock Index Futures
*Hedging Using Stock Index Futures
*Arbitrage Using Stock Index Futures
*MSCI Singapore Free Index
*The History and Development of Stock Index Futures