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Hong Kong bourse in early stages to offer index futures with MSCI

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Hong Kong bourse in early stages to offer index futures with MSCI

Hong Kong Exchanges & Clearing Ltd. on March 11 announced the signing of a license agreement with U.S.-based MSCI Inc. to introduce futures contracts on the MSCI China A Index but stopped short of providing a specific launch date or detailed product specifications.

The MSCI China A Index will comprise 421 large and midcap A-shares, on a pro forma basis, accessible via the stock connect scheme upon the completion of MSCI's inclusion process in November. The MSCI China A Index will represent the A-share portion of the MSCI emerging markets Index.

HKEX CEO Charles Li told reporters that there is no timetable for the launch yet as the plan is still subject to approval from Hong Kong's Securities and Futures Commission and market conditions. He added that HKEX has submitted all necessary documents to the SFC.

"We understand that there are a number of … arrangements between SFC and [mainland] regulators. I am sure the SFC will pursue the conversation as it sees appropriate," Li said. "We are at the beginning of the process."

Li said the agreement with MSCI would allow it to develop a risk management tool for international investors who need to manage their A-share equity exposure. The futures contracts on China share index are likely to be settled in U.S. dollar, or in both U.S. dollar and Chinese yuan, Li said.

Separately, HKEX expects the Chinese government to approve its cross-border investment channel called Connect Scheme for trading ferrous and precious metal contracts on Chinese exchanges through Hong Kong. The HKEX's three-year strategic plan, which was recently outlined by the CEO, is to include currencies, fixed-income products and other financial derivatives to its current offerings.