Further stock index futures opening
▶ Overseas investors may get access as part of broader reform
China is planning to open stock index futures trading to overseas investors in the future, a government official disclosed Wednesday, according to a Hong Kong-based news website.
The China Securities Regulatory Commission (CSRC) will allow Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) investors to participate in the Chinese mainland’s futures market, along with domestic social security funds, commercial banks and insurance funds as well as state-owned enterprises, said Jiao Zengjun, director of the futures management division under the CSRC, according to a Wednesday report by the hkcd.com, the website for the Hong Kong Commercial Daily newspaper.
The Hong Kong Exchanges and Clearing will also launch MSCI China A Index Futures along with the China Financial Futures Exchange, Jiao said.
He disclosed the information when delivering a speech in Hong Kong.
However, Jiao didn’t reveal the exact quota under which overseas investors will be allowed to invest in the mainland stock index futures.
“It’s likely that such investment will be included in the quota limitations of the QFII and RQFII programs,” Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times Wednesday.
Li Qiang, director of the research center under Xinhua Futures, said that the opening-up of domestic stock index futures is “not unexpected” considering the fact that the internationalization level of the domestic financial derivatives market has been rising in recent years, and that the Chinese government wants to provide a complete set of financial investment tools for overseas investors instead of just tilting toward the openingup of certain sectors.
“As the A-share market opens more and more to overseas investors, it would be ‘incomplete’ if overseas investors can’t get access to tools for hedging risks,” Li told the Global Times Wednesday.
China opened a yuan-denominated crude oil futures exchange in Shanghai in 2018. After less than one year of operation, the exchange has become the No.3 global crude exchange in terms of trading volume, according to media reports.
Li said that as a next step, China might open up more bulk commodity financial derivatives, such as non-ferrous metals futures, to overseas investors.
Xi said that stock index futures trading will be less attractive to overseas investors compared with spot trading. Mature overseas investors often are more cautious about futures trading, which often enlarges the losses and gains of investment, causing more risks.
Apart from opening stock index futures trading to overseas investors, China is also looking to normalize domestic investment in the sector after the government placed restrictions on stock index futures trading in mid-2015 in the wake of a stock market decline.
According to Jiao, the CSRC is planning to “resume the normal trading of stock index futures.”
China put restrictions on stock index futures trading in mid-2015 as the slump of futures at that time had a link effect with spot trading, further dragging down the A-share market, according to Xi.