PALAK SHAH Even as stock exchanges in India are shut due to international Labour Day trading holiday, Nifty futures in Singapore crashed by 550 points or nearly 5.5 per cent. On Thursday, the Nifty index had closed at 9,859 but the Singapore Nifty fell to 9,319 on Friday. Traders fear massive sell-off in markets on Monday, brokers told BusinessLine .

“Singapore Nifty crash could be a knee-jerk reaction to Donald Trump’s comments on China. But when underlying markets are closed for trading such reaction is bound to cause panic as it arouses trader anxiety,” said Sanjiv Chainani, founder, MD, Valueline Advisors.

A big drawback of Singapore Nifty is that only large foreign portfolio investors (FPIs) can trade there even when markets in India are shut. Institutions and retail investors lose out to Singapore traders, experts say. On Monday, when markets open, traders in India may scramble for covering longs.

The advantage to FPIs is that they have offices in Singapore and have already hedged there in Nifty. Singapore allows trading in Nifty when markets in India are shut and hence has been able to attract higher volume churn. Nifty index is one of the largest traded product of the Singapore bourse and at times the open interest on the exchange has risen more than the NSE. Often when India makes policy changes unfavourable to FPIs, their Nifty trading volumes rise on the SGX.

On Friday, markets in Germany, France, Italy and other major European economies are closed for Labour Day. The US index futures and stocks in UK were crashing as market sentiment was rattled by a new threat from US President Donald Trump to impose retaliatory tariffs on China over the coronavirus pandemic.

FTSE fell 1.9 per cent while US index futures were trading lower by more than 2 per cent at around 2.30 pm India time. Chinese currency came under pressure after Trump suggested that the long-awaited phase one trade deal signed between the two nations in January was now of secondary importance.

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