Hong Kong’s new futures product based on an index of onshore Chinese shares, which began trading on Monday, had the highest first-day trading value of any new futures launched on the Stock Exchange of Hong Kong, according to the bourse.
The data underscore the demand from investors in China for hedging tools during the current market volatility and also mark the start of a new front in the battle for derivatives dominance between exchange operator Hong Kong Exchanges and Clearing and Singapore Exchange, whose rival China derivatives product currently dominates the market.
HKEX’s MSCI China A 50 Connect Index Futures, which track a new index of 50 A-shares – Chinese stocks traded onshore, saw 1,395 contracts traded on Monday with a notional value of $93.5 million, according to a company spokesperson.
This figure was the highest for the first day of any new futures contract traded on the exchange, he said.
International investors have been increasing their exposure to onshore-listed Chinese stocks in recent years, but often complain that they have limited access to derivatives products like futures to manage their risk.
This has become particularly relevant during recent months, as Chinese policymakers have launched a series of crackdowns on sectors from technology to property that have roiled Chinese stocks.
“With global investors’ China exposure growing, changes in China‘s regulatory policies are having bigger and bigger impacts on their portfolios, so the demand to manage such risks more accurately is on the rise,” Wei Zhen, MSCI’s head of Asia-Pacific Index Solutions Research, said.
Wei added that the new product would help investors hedge short-term regulatory risks.
In addition, China‘s securities regulator gave the green light on Monday to four Chinese mutual fund managers to launch exchange-traded funds based on the new A 50 Connect Index, potentially driving further demand from traders wishing to hedge their exposure in those products.
• Reuters with additional editing by Jim Pollard