S&P strengthens relationship with Shenzhen Stock Exchange

Standard & Poor's, global rating agency and index provider, has signed a memorandum of understanding (MOU) with the Shenzhen Stock Exchange (SzSE) in China to cooperate on index development and product listings between the two institutions.

According to the MoU, SzSE will authorise Standard & Poor's to use its securities information to create and launch a series of investable and benchmark indices in China to meet the growing needs of global investors. As part of the agreement, Standard & Poor's will license its flagship S&P 500 Index to SzSE to develop and trade a listed open-ended fund through the Qualified Domestic Institutional Investor (QDII) programme, a system whereby domestic Chinese institutional investors are allowed to invest in overseas markets under a quota system. The fund will be issued and managed by China Southern Fund Management, a top-ranking fund manager in China.

''This marks a milestone of Standard & Poor's index business development in China, a market that continues to be of strategic importance to our global business growth,'' says Alex Matturri, head of Standard & Poor's Index Services. ''With a market capitalisation of approximately $3.5 trillion, China is now one of the most important and closely watched markets in the world. The critical role played by the Chinese stock exchanges in this growth story certainly cannot be overlooked.''

''With the signing of this MOU, global indexed product issuers and investors who are keen to create or invest in products composed of domestic Chinese securities will now have more options in terms of indices,'' adds Tom Schiller, executive managing director of Asia-Pacific for Standard & Poor's. ''The listing of the S&P 500 Index based fund on SzSE will additionally offer new investment opportunities for Chinese investors interested in investing in the US equity market. With Standard & Poor's strong brand name and world-class product quality and client services, we are confident that our business will expand together with the fast growing Chinese economy and financial markets.''

Standard & Poor's is the first major independent index provider to sign an MOU with SzSE since SzSE announced a set of rules that stipulate how securities information of SzSE can be used by third parties to compile and commercialise indices on April 1, 2009.

The S&P 500 Index is widely regarded as the foremost measure of the US equity market, and is the most followed index in the world. Globally, there is more than $4 trillion benchmarked to the S&P 500 Index, with indexed assets making up more than $ 1.5 trillion of this total. The index includes 500 leading companies in the leading industries of the US, covering approximately 75 per cent of the US equity universe by market capitalisation.