Hong Kong Bourse to Offer China A Share Index Futures

(Bloomberg) -- Hong Kong’s exchange was cleared to start offering long awaited A share index futures contracts, giving global investors a new tool to hedge China risk. 

Hong Kong Exchanges & Clearing Ltd. said on Friday it had signed an agreement with MSCI Inc. to launch futures contract based on the MSCI China A 50 Connect Index, tracking performance of 50 Shanghai and Shenzhen stocks available via Stock Connect. The product will be launched on Oct. 18, according to a statement. 

The “new product will act as a key risk management tool for investors in managing their A-share equity exposure,” Chief Executive Officer Nicolas Aguzin said in the statement.  

“This is significant for China as the new A-share derivatives products will drive even more international investor interest into, and demand for, mainland China equities, supporting further development and internationalization of China’s capital market,” Aguzin said at a press briefing on Friday, describing the product as a “game changer” in mainland’s financial market development. 

It also reinforces Hong Kong’s role as the leading global market in Asia, demonstrating its “pivoting role” in connecting China and the world, Aguzin said. He declined to provide an estimate on how much the new product could add to the exchange’s revenue. 

While Beijing’s crackdown on its private sector has brought volatility to the capital market, Aguzin said demand from international investors in investing in China through the Hong Kong remains strong over the long term. 

The move came after the bourse was granted approval by the city’s Securities and Futures Commission and the mainland regulator. It will bring China closer to an expanded inclusion in major global indexes. MSCI has listed a lack of access to hedging and derivatives as one pressing issue for the Chinese market. 

The MSCI and HKEX first agreed on a pact to issue A share futures back in 2019.

The SFC said in a statement that the instruments will provide a significant new risk management tool and enable further growth of capital flows into the mainland. 

In a separate statement, China Securities Regulatory Commission gave its support for the launch and said it will continue to work with the SFC on derivatives regulations and cross-border risk management. 

Hong Kong’s Financial Secretary Paul Chan said the move could strengthen the city’s function as an offshore yuan hub, as well as an international asset management and risk management center.  

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