New fu­tures con­tract launched in Hong Kong

Prod­uct will keep track of do­mes­tic firms listed in HK and main­land

China Daily (Hong Kong) - - BUSINESS - By GAO CHANGXIN in Hong Kong gaochangxin@chi­nadaily.com.cn

Hong Kong Ex­changes and Clear­ing on Wed­nes­day un­veiled a new stock in­dex fu­tures con­tract track­ing main­land com­pa­nies listed in Hong Kong and on the main­land.

The new fu­tures con­tract, trad­ing of which starts on Aug 12 on the HKEx, fol­lows the CES China 120 In­dex, which is main­tained by China Ex­changes Ser­vices Co Ltd. Launched at the end of last year, CES is a joint ven­ture be­tween China’s three stock ex­changes: HKEx, Shang­hai Stock Ex­change and Shen­zhen Stock Ex­change.

The new prod­uct was launched to cre­ate syn­ergy be­tween the three ex­changes. Op­tions on the same un­der­ly­ing in­dex are in the pipe­line.

“The new prod­uct marks a mile­stone for the three ex­changes’ co­op­er­a­tion. Go­ing for­ward, we will see more fruit­ful gains emerg­ing from the co­op­er­a­tion,” said Charles Li, HKEx’s chief ex­ec­u­tive.

The CES China 120 In­dex com­prises the 80 largest A- share com­pa­nies on the Shang­hai and Shen­zhen stock ex­changes, as well as the 40 largest com­pa­nies on the HKEx, in­clud­ing H-share com­pa­nies and red chips. H-shares are com­pa­nies in­cor­po­rated in the main­land and listed in Hong Kong. Red chips are com­pa­nies based in China, in­cor­po­rated else­where and listed in Hong Kong.

Most heav­ily weighted con­stituents in­clude China Con­struc­tion Bank Corp, China Mo­bile Ltd, Ten­cent Hold­ings and China National Off­shore Oil Corp.

Calvin Tai, co-head of eq­ui­ties, fixed in­come and cur­rency in HKEx’s global mar­kets di­vi­sion, said the prod­uct will help in­vestors op­ti­mize their China eq­uity ex­po­sure.

“In­vestors can trade this one prod­uct and have ex­po­sure to Chi­nese eq­ui­ties in both Hong Kong and on the main­land. Be­fore, they would have had to buy a com­bi­na­tion of prod­ucts to achieve that goal,” said Tai.

The CES China 120 In­dex has slumped around 12 per­cent in 2013 as a re­flec­tion of China’s slow­ing growth. The in­dex stood at 3,720 points on Aug 1. The con­tract value is HK$186,000 (about $24,000) based on the in­dex on Aug 1. Min­i­mum fluc­tu­a­tion is set at 0.5 of an in­dex point. HKEx will of­fer fu­tures ex­pir­ing in Au­gust, Septem­ber, De­cem­ber and March. There will be no com­mis­sion levy on the prod­ucts for the first six months of trad­ing.

The new prod­uct comes on the back of ever-grow­ing mar­ket de­mand for China ex­po­sure in light of China’s grow­ing eco­nomic strength. The aver­age daily trad­ing vol­ume of HKEx’s H-shares in­dex fu­tures jumped by more than 100 times over the past 10 years. Mar­ket cap­i­tal­iza­tion of H- share com­pa­nies grew more than 23 times over the past decade to HK$4,211 bil­lion at the end of June this year. Red chips saw their mar­ket cap­i­tal­iza­tion in­crease five­fold.

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