According to a report in India's Economic Times, the South Asian Federation of Exchanges (SAFE) has proposed the launch of a new SAFE index which could include a number of blue chip stocks from the region, and begin trading as early as next year.

A team of leading global consultants is currently working to construct the index.

This could be followed by in mid-2007 by the launch of an exchange traded fund (ETF). First developed around ten years ago, ETFs give investors low cost access to a basket of stocks through one tradeable share and these vehicles have become very popular across the globe in recent years.

However, analysts have cautioned that the early development of a harmonised South Asian capital market could be hampered by the need for unified clearing and settlement systems, and exchange rate disparities.

Nonetheless, India, Pakistan, Sri Lanka, Bangladesh and the Maldives are all said to be keen to launch such an index. Other members of the SAFE group include Bhutan, Mauritius and Nepal.

The members of SAFE have also agreed to work towards common standards including international accounting standards and best business practices in capital markets.