Hong Kong Bourse Jumps on China A Share Index Futures Launch
Bloomberg
Published Aug 23, 2021 12:36
(Bloomberg) -- Hong Kong Exchanges & Clearing Ltd. rallied by the most since January after receiving clearance to offer long awaited A share index futures contracts, giving global investors a new tool to hedge China risk.
The bourse on Friday signed an agreement with MSCI Inc. to launch futures contract based on the MSCI China A 50 Connect Index, tracking performance of 50 Shanghai and Shenzhen stocks that are traded via a link to Hong Kong. The futures will start trading on Oct. 18, according to a statement.
HKEX shares rose as much as 6.6% early Monday. Singapore Exchange (OTC:SPXCY) Ltd., which had introduced the first index futures tracking A shares, slumped 4.7% as of 10:14 a.m. in Singapore.
“HKEX receiving the green light to launch a competing product to SGX’s {{28930|FTSE ChChina A50 futures we believe will be viewed as negative for SGX’s share price,” Citigroup (NYSE:C) analysts including Robert Kong and Yafei Tian wrote in a note. They forecast about HK$1 billion ($128 million) revenue contribution to the Hong Kong bourse from the MSCI A Share futures by 2024.
“This is significant for China as the new A-share derivatives products will drive even more international investor interest into, and demand for, mainland China equities, supporting further development and internationalization of China’s capital market,” HKEX Chief Executive Officer Nicolas Aguzin said. The product will be a “game changer” for the mainland’s financial market, he said.
After a long wait, the bourse on Friday was granted approval by the city’s Securities and Futures Commission and the mainland regulator. It will bring China closer to an expanded inclusion in major global indexes. MSCI has listed a lack of access to hedging and derivatives as one pressing issue for the Chinese market.
It reinforces Hong Kong’s role as the leading global market in Asia, demonstrating its “pivoting role” in connecting China and the world, Aguzin said at a press briefing. He declined to provide an estimate on how much the new product could add to the exchange’s revenue.
While Beijing’s crackdown on its private sector has brought volatility to the capital market, Aguzin said demand from international investors in investing in China through the Hong Kong remains strong over the long term.
The SFC said in a statement that the instruments will provide a significant new risk management tool and enable further growth of capital flows into the mainland.
In a separate statement, China Securities Regulatory Commission gave its support for the launch and said it will continue to work with the SFC on derivatives regulations and cross-border risk management.
Get The App
Hong Kong’s Financial Secretary Paul Chan said the introduction of the futures could strengthen the city’s function as an offshore yuan hub, as well as an international asset management and risk management center.
The MSCI and HKEX first agreed on a pact to issue A share futures back in 2019.
©2021 Bloomberg L.P.
Written By: Bloomberg
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.