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Monday, 18 January 2010
Beijing gives go-ahead for index futures
The central government yesterday approved stock index futures, giving mainland investors a tool to protect against losses and profit from any declines in a market that rose 80 per cent last year.
The central government yesterday approved stock index futures, giving mainland investors a tool to protect against losses and profit from any declines in a market that rose 80 per cent last year.
The government also approved margin trading and short selling, the China Securities Regulatory Commission said. It might take three months to complete preparations for index futures, the regulator said.
Index futures - agreements to buy or sell an index at a preset value on an agreed date - may help ease fluctuations after the Shanghai Composite Index doubled in 2007, then slumped 65 per cent in 2008 before rebounding last year. Until now, mainland investors could only profit from gains in equities.
“This is a milestone in the development of China’s capital markets,” said Wang Yihuan at Beijing-based China Asset Management. “Investors finally have the tools to hedge or speculate and that will help all types of market participants to become more sophisticated.”
Index futures are part of the mainland’s push to make more investment options available in the world’s third-biggest stock market. The limited scope of securities to trade has contributed to boom-and-bust cycles in China’s stock and property markets.
The first stock index contracts, based on the CSI 300 Index, may begin trading after the Communist Party’s annual congress in March, an official with knowledge of the matter said. The CSI 300 tracks the 300 biggest stocks traded in Shanghai and Shenzhen.
Rules for the index futures would deter participation by retail investors, said Jing Ulrich, the chairman of China equities and commodities at JP Morgan Chase.
Investors will be required to put up 10 per cent of a contract’s value to buy, sell or short CSI 300-based futures as collateral, according to rules published on China Financial Futures Exchange’s website in 2007. The exchange has been conducting mock trading in the securities since October 2006.
The value of the futures contracts will be points of the CSI 300 multiplied by 300 yuan (HK$340), according to the trading rules set.
Investors will need to spend 105,000 yuan to buy a single futures contract when the CSI 300 is at the 3,500 level, establishing a “cost barrier to retail participation”, Ulrich wrote in a note distributed after the announcement. “These initiatives will provide tools for institutional investors to hedge risks and should reduce market volatility in the long-term.”
“The launch of index futures is positive for the market,” said Zhang Xiuqi, a Shanghai-based strategist at China International Fund Management. Zhang said stocks with large market capitalisations would be boosted because they were heavily weighted in the index.
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Beijing gives go-ahead for index futures
Bloomberg in Beijing
09 January 2010
The central government yesterday approved stock index futures, giving mainland investors a tool to protect against losses and profit from any declines in a market that rose 80 per cent last year.
The government also approved margin trading and short selling, the China Securities Regulatory Commission said. It might take three months to complete preparations for index futures, the regulator said.
Index futures - agreements to buy or sell an index at a preset value on an agreed date - may help ease fluctuations after the Shanghai Composite Index doubled in 2007, then slumped 65 per cent in 2008 before rebounding last year. Until now, mainland investors could only profit from gains in equities.
“This is a milestone in the development of China’s capital markets,” said Wang Yihuan at Beijing-based China Asset Management. “Investors finally have the tools to hedge or speculate and that will help all types of market participants to become more sophisticated.”
Index futures are part of the mainland’s push to make more investment options available in the world’s third-biggest stock market. The limited scope of securities to trade has contributed to boom-and-bust cycles in China’s stock and property markets.
The first stock index contracts, based on the CSI 300 Index, may begin trading after the Communist Party’s annual congress in March, an official with knowledge of the matter said. The CSI 300 tracks the 300 biggest stocks traded in Shanghai and Shenzhen.
Rules for the index futures would deter participation by retail investors, said Jing Ulrich, the chairman of China equities and commodities at JP Morgan Chase.
Investors will be required to put up 10 per cent of a contract’s value to buy, sell or short CSI 300-based futures as collateral, according to rules published on China Financial Futures Exchange’s website in 2007. The exchange has been conducting mock trading in the securities since October 2006.
The value of the futures contracts will be points of the CSI 300 multiplied by 300 yuan (HK$340), according to the trading rules set.
Investors will need to spend 105,000 yuan to buy a single futures contract when the CSI 300 is at the 3,500 level, establishing a “cost barrier to retail participation”, Ulrich wrote in a note distributed after the announcement. “These initiatives will provide tools for institutional investors to hedge risks and should reduce market volatility in the long-term.”
“The launch of index futures is positive for the market,” said Zhang Xiuqi, a Shanghai-based strategist at China International Fund Management. Zhang said stocks with large market capitalisations would be boosted because they were heavily weighted in the index.
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