Europe

S&P Partners with Two Foreign Exchanges to Launch Co-Branded Indexes

Europe

Index provider Standard & Poor's is looking to expand its strong domestic brand name overseas. The New York-based firm recently announced partnerships with two recognized international equity exchanges: Hong Kong Exchanges and Clearing Limited (HKEx) and the Borsa Italiana.

S&P signed a letter of intent with HKEx for the creation of a new series of co-braded equity indexes covering stocks listed on Hong Kong's stock exchange. The new indexes should be introduced in April 2002 and will use S&P's Global Industry Classification Standard (GICS), which allows for apples-to-apples sector and industry comparisons across geographical regions.

S&P also partnered with the Borsa Italiana to launch a broad Italian index that it hopes will become as visible as the domestic S&P 500. The co-braded S&P/MIB 45, also to be launched in April 2002, will be a broader benchmark than the existing MIB 30, capturing 80% of Italy' total market capitalization. The new index will be free-float weighted and will also pigeonhole companies according to GICS.

Robert Shakotko, managing director of Standard & Poor's Index Services, said the agreements are wide-ranging and allow for a family of co-braded indexes to be introduced on each of the exchanges. He also indicated the new indexes could be used as the basis for financial products, including exchange-traded funds.

Last month, Dow Jones and the New York Stock Exchange teamed up to introduce co-braded benchmarks later this year.

"The exchanges want popular new vehicles to trade, and this is one way to do it," said Gavin Quill, an analyst at Financial Research Corporation. "The index providers need to find new ways to develop products, and segmenting by exchange is one option. Also, there are now so many indices that the providers need to differentiate themselves by piggybacking on the brand recognition of the popular local exchanges."