Under an agreement signed today with the Russian Trading System Stock Exchange (RTS), Standard & Poor's, the leading provider of independent investment research, ratings and indices, is adding the RTS Index (RTSI), the leading Russian equity benchmark for international and domestic investors, to its global index portfolio.
RTS grants to Standard & Poor's exclusive rights for distributing, providing, licensing, marketing and publicizing the RTS Indices.
Under the agreement, Standard & Poor's has assumed commercial management for licensing the RTSI to investment managers, trading desks and product structurers for the creation of financial products. Standard & Poor's also immediately joins the RTS Information Committee which performs general control and amends the existing methodology of the RTS Index. Standard & Poor's representative becomes a permanent member in an advisory capacity to provide international market feedback on Russian index governance. The business arrangement is expected to entail co-branding and expansion of RTS's family of tradable and benchmark indices. This will enhance their appeal as portfolio management tools for global investors and will further pave the way for development of index-linked vehicles and listed index derivatives.
Over the last 12 months the existing headline RTS Index more than doubled in value - from 600 points to 1300 points. It currently captures more than USD 300 billion, about 80 percent, of the Russian stock market capitalization, excluding Gazprom shares (which before the beginning of 2006 traded exclusively on the St Petersburg Stock Exchange). The latter are expected to be added to RTSI soon, which will increase its coverage to about USD 490 billion, 85% of the market capitalization.
Cross-border investment into Russia more than doubled between 2002 and 2004, and there was a net inflow of capital to Russia at the end of 2005, fuelling demand for transparent and rigorous benchmarks that not only capture the uniqueness of Russian equities but also faithfully measure the market's performance. Standard & Poor's is the world leader for domestic headline indices through its local exchange partnerships, and RTS is the logical extension to Standard & Poor's existing network of 12 exchange partnerships in key geographies. In pursuing this commitment to the emerging markets, Standard & Poor's is responding to international investors seeking high growth areas and new strategy plays by capturing another vital component of the increasingly important BRIC economies (Brazil, Russia, India & China).
Robert Shakotko, Managing Director of Standard & Poor's Index Services, said, "Standard & Poor's strategy is to bring global index standards to local markets. Our clients have expressed a growing interest in products linked to Russian equities. We are therefore pleased to offer the RTS index, already the recognised brand among Russian indices, as part of S&P's global licensing program."
Oleg Safonov, president of RTS, stated, "RTS sees multiple benefits in delegating commercial management to Standard & Poor's - both short and long-term. This will position RTS as the premier player for investing in the listed Russian economy through recognition of the S&P brand and its standards of quality. RTS benefits from instant commercial exposure to the world's largest existing index licensing network, as well as a valuable source of expert advice on index business development and management issues. For the Russian equity market, this means higher volumes and trading liquidity due to a certain internationalization of market participants who access the underlying stocks."