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HKEX
BusinessBanking & Finance

HKEX to launch A-shares futures, filling a gap in cross-border finance and giving Hong Kong the edge over Singapore

  • Securities and Futures Commission gave its approval for the launch of the new futures on Friday
  • HKEX has entered into a new licensing agreement with global index provider MSCI to launch the new futures contract based on the MSCI China A 50 Connect Index

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Bronze sculptures of bulls, the symbol of the Hong Kong Stock Exchange and the flag of HKEX flying next to the Hong Kong SAR flag, at the Exchange Square in Central on 2 June 2020. Photo: Winson Wong
Enoch Yiu
Hong Kong Exchanges and Clearing Limited (HKEX), the operator of Asia’s third-largest capital market, will launch a financial derivative in October for investors to hedge their risks of investing in China’s A-shares market, a move that gives the city an edge over Singapore in fostering cross-border regulations with the mainland.
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A futures product based on 50 of the yuan-denominated A-shares on the Shanghai and Shenzhen exchanges will kick off on October 18, following the green light by Hong Kong’s Securities and Futures Commission, according to a statement by HKEX. This would make it the very first A-shares derivative in Hong Kong, where China-domiciled companies already make up nearly 80 per cent of the daily turnover and value of the city’s stock market.

“It could serve as a useful risk management tool for offshore investors taking part in the A-shares market, while broadening the offering of financial products in Hong Kong at the same time,” Hong Kong’s Financial Secretary Paul Chan Mo-po said in a statement, adding the new product would further reinforce Hong Kong’s role as an offshore yuan business hub and as a risk management centre as outlined in the National 14th Five-Year Plan.

The new derivative would help to plug a gap in the financial instruments and regulations that link mainland China with Hong Kong, where a seven-year-old investment channel called the Connect scheme handles about HK$5 billion a day in cross-border transactions. The A-shares futures enable offshore investors to hedge the risks by taking contrarian positions to their underlying assets.

The move, four years in the making, marks a step closer towards cross-border regulation between Hong Kong and the mainland, the China Securities Regulatory Commission (CSRC) said in a statement after the HKEX announcement. The two regulators have already been working closely since the first Connect was set up between Hong Kong and Shanghai in 2014, formalised in a 2017 regulatory cooperation accord that foreshadowed the creation of such an A-shares futures product in Hong Kong.

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