MSCI MSCI Inc

By Saumya Vaishampayan 

Global investors could soon have an easier way to make bets on or against China's stock market, with Hong Kong's exchange planning to offer futures trading tied to mainland shares.

Introducing these instruments would ease a headache for foreign institutions--and make it more likely that stocks in Shanghai and Shenzhen will eventually play bigger roles in major international indexes.

Hong Kong Exchanges and Clearing Ltd. said Monday it had signed a deal with MSCI Inc. to launch futures linked to the index provider's MSCI China A Index, which will include 421 onshore Chinese stocks by November. The index contracts will be listed and traded in Hong Kong and settled in cash.

The announcement comes just days after MSCI moved to increase the contribution of mainland Chinese shares to its global benchmark for emerging markets, and some other influential indexes. The proposed futures would cover the same stocks.

Charles Li, chief executive of the Hong Kong exchange, said index futures would be a key risk-management tool for foreign investors. In a call with reporters, he said the exchange had asked for approval from Hong Kong's market regulator, and that mainland regulators and exchanges would also "have a view on something like this."

Even after MSCI lifts the weight of Chinese shares in its indexes this year, they will still be limited by a 20% "inclusion factor." This adjustment, reflecting the difficulties of investing in China, means onshore stocks will have one-fifth the index impact of similar companies listed in the most accessible locations.

Fund managers consulted by MSCI highlighted access to hedging and derivatives as a key issue to fix before the share of mainland stocks rose further, the company said last month. Other difficulties included differences between mainland Chinese holidays and those in Hong Kong, as well as with trade settlement.

For the whole market, "the priority is really to support those global investors, passive or active, who are following the MSCI inclusion," said Stephane Loiseau, head of cash equities and global execution services for Asia Pacific at Société Générale.

Index futures tied to the CSI 300, an index that tracks the biggest stocks listed in either Shanghai or Shenzhen, already exist in mainland China, though some global investors can't trade them. Singapore hosts U.S. dollar-denominated contracts linked to another gauge, the FTSE China A50.

Alexious Lee, head of China capital access at CLSA, said the biggest uncertainty for his clients is the heavy influence of individual traders on the domestic Chinese market, which can result in big swings in stocks. "That's why a hedging mechanism like this is important," he added.

The Hong Kong exchange said recently it wanted to broaden the Stock Connect, a trading link with mainland exchanges that has helped expand foreign investors' access to Chinese markets and allowed mainland investors to trade Hong Kong-listed stocks. As well as futures, it said it wanted to introduce short selling, or the ability to bet against stocks by borrowing and reselling shares, to both legs of the program.

Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com

(END) Dow Jones Newswires

March 11, 2019 04:16 ET (08:16 GMT)

MSCI (NYSE:MSCI)
Gráfico Histórico do Ativo
De Jun 2024 até Jul 2024

MSCI (NYSE:MSCI)
Gráfico Histórico do Ativo
De Jul 2023 até Jul 2024