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Foreign investors likely to start index trading within year
By Lydia Chen |
January 26, 2011, Wednesday
|
Online Edition
Online Edition
CHINA is planning to allow foreign investors to trade index futures, a move that will hedge their securities risks while improving the country's derivatives futures market now dominated by commodity trading.
The draft plan released by China Securities Regulatory Commission will give green light to qualified foreign institutional investors to trade stock index futures, offering them flexibility to hedge risks in a stock market that ranked the world's third worst last year.
However, international investors are required to keep their daily value of futures contracts within the investment quota approved by the State Administration of Foreign Exchange, according to the draft.
Volume limits and trading behavior requirement were the same as imposed on Chinese brokerages that trade index futures to make sure "risks are under control," the draft said.
The authority may further open the market to foreign investors if the index futures market develops well, Cao Guobao, an analyst with Everbright Securities told Sina.com.
The commission is now seeking public opinion on the draft until February 12.
Although, the draft didn't say when the new rules will be implemented, analysts estimated that QFIIs may start the business as early as later this year.
Opening to foreign players, however, will not make a difference to the mainland markets as QFIIs are constrained by investment quota and only a small group of overseas investors are classified as QFII, Cao added.
By the end of last December, the State Administration of Foreign Exchange approved 97 QFII institutions with a total investment of US$19.72 billion.
China last April approved the trading of futures contracts linked to the CSI 300 stock index after eight years of preparation. The futures let investors hedge against violent market fluctuations.
The Shanghai-based China Financial Futures Exchange saw 45.9 million contracts traded last year.
The draft plan released by China Securities Regulatory Commission will give green light to qualified foreign institutional investors to trade stock index futures, offering them flexibility to hedge risks in a stock market that ranked the world's third worst last year.
However, international investors are required to keep their daily value of futures contracts within the investment quota approved by the State Administration of Foreign Exchange, according to the draft.
Volume limits and trading behavior requirement were the same as imposed on Chinese brokerages that trade index futures to make sure "risks are under control," the draft said.
The authority may further open the market to foreign investors if the index futures market develops well, Cao Guobao, an analyst with Everbright Securities told Sina.com.
The commission is now seeking public opinion on the draft until February 12.
Although, the draft didn't say when the new rules will be implemented, analysts estimated that QFIIs may start the business as early as later this year.
Opening to foreign players, however, will not make a difference to the mainland markets as QFIIs are constrained by investment quota and only a small group of overseas investors are classified as QFII, Cao added.
By the end of last December, the State Administration of Foreign Exchange approved 97 QFII institutions with a total investment of US$19.72 billion.
China last April approved the trading of futures contracts linked to the CSI 300 stock index after eight years of preparation. The futures let investors hedge against violent market fluctuations.
The Shanghai-based China Financial Futures Exchange saw 45.9 million contracts traded last year.
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