SHANGHAI/HONG KONG (Reuters) – Global index publisher MSCI and the Hong Kong stock exchange said on Monday they will launch futures contracts on the MSCI China A Index to provide a hedging tool as international investor interest in Chinese mainland shares surges.
The license agreement between MSCI and Hong Kong Exchanges and Clearing Ltd (HKEX), which will launch the new product, comes less than two weeks after MSCI announced it would quadruple the weighting of Chinese shares in its global benchmarks later this year.
HKEX Chief Executive Charles Li said the agreement with MSCI provides “a key risk management tool for international investors who need to manage their A-share equity exposure”.
The new product is among a host of other derivatives launched by global exchanges in recent years to help manage exposure to mainland Chinese markets.
Singapore Exchange Ltd’s A50 Index Futures contract, for example, allows offshore investors to track 50 Chinese A-shares directly.
Li said on a conference call on Monday the new HKEX futures contract will track the entire 421 large- and mid-cap A-shares included in the benchmark MSCI Emerging Markets Index.
HKEX said in a statement it was yet to determine a launch date and that the product remains subject to regulatory approval and market conditions.
China has also been opening up its domestic derivatives market as A-shares enter global indexes.
Draft rules in late January said foreign institutions will have access to onshore derivatives, including financial futures, under the Qualified Foreign Institutional Investor (QFII) scheme and its yuan-denominated equivalent, RQFII.
Fang Xinghai, deputy head of China’s securities regulator, predicted in January that foreign capital inflows to Chinese stocks this year will double to about 600 billion yuan ($89.76 billion) from last year.
Last week, Fang told local media that regulators were studying measures to further open the index futures market.
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