Mumbai: MSCI Inc. on Wednesday said it is considering placing some emerging markets including India on notice for limiting investor access.
In a press release, MSCI, one of the world’s biggest index compilers, said it is considering introducing an alternative to fully including or excluding markets from its indexes after some emerging markets introduced certain restrictions in market accessibility.
“This alternative could be applied in instances where local stakeholders impose market accessibility restrictions that would not fully impair international institutional investors from accessing or investing in that market but that may nevertheless make the market less accessible and investable," MSCI said.
As an example of restrictions in India, MSCI cited lengthy and burdensome mandatory registration process by the Securities and Exchange Board of India (Sebi) for international investors.
On 9 February, National Stock Exchange of India (NSE) barred foreign bourses from trading in Nifty derivatives. In response, Singapore Exchange Ltd (SGX) came up with a new product that works just like the Nifty index, bypassing Indian exchanges.
NSE challenged the launch of this product in the Bombay high court, and the court restrained SGX from launching new contracts until further orders. Earlier this week, the two exchanges agreed before the Bombay high court to take their dispute over SGX’s India-focused derivative products to arbitration.
The global investor fraternity, however, gives a thumbs-down to protectionism.
“MSCI must safeguard the best interests of their international client base when protectionism discriminates against foreign investors in any particular nation, even a large emerging market such as India," said Patrick L. Young, a capital markets expert and CEO of crowd-funding platform Hanza Trade.
In India, there are also restrictions on certain investment instruments that are based on certain indexes and are both issued outside of India and traded on a regulated exchange. “It is expected that stock exchanges, which often have legal or natural monopolies, should not impose clauses in their provision of stock market data, such as securities’ prices, that could lead directly or indirectly to restricting the availability of investment instruments globally," MSCI said.
Jayshree P. Upadhyay contributed to this story.