HKEX enters China's derivatives market with A-share futures launch

The bourse’s new futures contract is based on the MSCI China A 50 Connect Index.

Hong Kong Exchanges and Clearing Limited (HKEX) has entered China’s derivatives market with the launch of its A-share index futures contract called MSCI China A 50 Connect Index Futures on 18 October.

The new contract has been certified by the US Commodity Futures Trading Commission.

HKEX said its derivatives contact is “unique” as it is based on the MSCI China A 50 Connect Index which is “a sector-balanced index that selects 50 names from among the largest stocks listed in Shanghai and Shenzhen available via Stock Connect.”

Stock Connect, according to HKEX, saw record half-yearly highs in 2021 with an average daily turnover of Northbound and Southbound trading up 54% to RMB114b and 132%to $48b, respectively.

HKEX said its derivatives contact also targets at least two stocks from each sector which will “prevent overweighting in specific sectors such as financials and underweighting in new economy sectors.”

HKEX’s competitors, on the other hand, like Singapore Exchange (SGX) based its derivatives contract on the FTSE index.

HKEX CEO Nicolas Aguzin said the launch of the new derivatives  product “further strengthens Hong Kong’s role as the gateway to China for global investors and marks another great step forward in supporting the further internationalisation of China’s capital markets.”

Aguzin added that Hong Kong will continue to develop its position as Asia’s derivatives hub.

To support the launch of its new derivatives product, HKEX will waive its trading fees until June 2022.