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BIZCHINA / Center
QFII to participate in index futures trading
(chinadaily.com.cn)
Updated: 2007-08-17 11:23
Qualified foreign institutional investors (QFII) will be allowed to
participate in the expanded CSI 300 index futures trading system, the
China Business News Thursday quoted a draft regulation, which solicited
securities insiders' opinions, as saying.
Related readings:
?Supervisory system on stock index futures established
?Conditions for stock-index futures are 'in place'
?The long road to index futures trading
?Rules changed to woo long-term QFII funds
The draft was handed out by securities regulators, and provoked
discussion regarding the participation of foreign firms. Currently, no
index futures trading is available in the Chinese mainland markets,
although at present a CSI 300 index futures trading system offers virtual
investments for domestic institutions.
A source close to the matter said that the draft imposed severe
restrictions on QFII's investment in the index futures. According to the
rules, QFII funds can invest at most 10 percent of their investment quota
in the financial derivatives as a way to hedge off market risks.
Considering QFII funds at present have a total quota of US$10 billion, a
maximum of US$1 billion would flow into the new market.
"The measure would provide QFII funds with another channel for investment
in financial derivatives of domestic stock indices. So far, quite a few
QFII funds have investments in the FTSE/Xinhua China A 50 Index in
Singapore," said Gao Zijian, a securities analyst with Orient Securities.
"After the launch of the CSI 300 index futures, QFII fund managers will
be able to analyze the difference in futures-spot prices between the two
markets and make more accurate judgments regarding the A-share market,"
Gao said.
Wu Guijun, from the department of financial futures of Essence
Securities, said: "The participation of QFII will not cause substantial
impacts on the A-share market, but excessive fluctuation may occur near
the maturity day, when index futures contracts are to be settled.
Therefore, investment in heavy stocks that have greater impact on the
index will create extra opportunities as well as risks."
(For more biz stories, please visit Industry Updates)
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