Tue. Jan 25th, 2022

© Bloomberg. Pedestrians wearing protective masks pass in front of an electronic marker showing the price of Hong Kong Exchanges & Clearing Ltd. shares. (HKEX) at the Exchange Square complex in Hong Kong, China, on Wednesday, August 19, 2020. HKEX gained 1% in profits, benefiting from a large number of high-profile Chinese stock quotes and a recovery in trade, as political and pandemic tensions caused volatility.

(Bloomberg) – Hong Kong Exchanges & Clearing Ltd. concentrated since January after receiving the liquidation to offer long-awaited index A stock futures contracts, offering global investors a new tool to hedge China’s risk.

On Friday, the stock exchange signed an agreement with MSCI Inc. to launch a futures contract based on the MSCI China A 50 Connect index, which tracks the performance of 50 shares of Shanghai and Shenzhen listed shares through a link to Hong Kong. According to a statement, futures will begin trading on October 18.

HKEX shares rose as much as 6.6% early Monday. Singapore Exchange (OTC 🙂 Ltd., which had introduced the first futures tracking indices on index A, fell 4.7% at 10:14 a.m. in Singapore.

“HKEX receives green light to launch a competing product on SGX {{28930 | FTSE Ch, we believe it will be considered negative for the price of SGX shares” Citigroup (NYSE 🙂 analysts, including Robert Kong and Yafei Tian, ​​wrote in a note. They anticipate an income contribution of approximately A $ 1 billion ($ 128 million) to the Hong Kong Stock Exchange from future MSCI A Share for 2024.

“This is significant for China, as the new A-share derivatives will further drive the interest and demand of international investors in mainland China stocks, supporting the development and internationalization of the capital stock market. China, ”said Nicolas Aguzin, executive director of HKEX. The product will be a “game changer” for the mainland financial market, he said.

After a long wait, Friday’s stock exchange was approved by the city’s Securities and Futures Commission and the continental regulator. It will bring China closer to an expanded inclusion in major global indices. MSCI has categorized the lack of access to hedging and derivatives as one of the pressing problems in the Chinese market.

It strengthens Hong Kong’s role as a leading world market in Asia, demonstrating its “key role” in China’s connection to the world, Aguzin said at a news conference. He declined to provide an estimate of how much the new product could add to the stock market revenue.

While Beijing’s crackdown on its private sector has led to volatility in the capital market, Aguzin said international investor demand to invest in China through Hong Kong remains strong in the long run.

The SFC said in a statement that the instruments will provide a significant new risk management tool and allow for greater growth in capital flows to the mainland.

In a separate statement, the China Securities Regulatory Commission supported the launch and said it will continue to work with the SFC on derivative regulation and cross-border risk management.

Hong Kong Finance Secretary Paul Chan said the introduction of futures could strengthen the city’s role as a hub, as well as an international asset and risk management center.

MSCI and HKEX first agreed to a pact to issue futures on A shares in 2019.

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