Hong Kong’s stock exchange launched a new futures contracts scheme on Monday, making it easier for international investors to bet on mainland Chinese stocks – and in the process providing a much-needed boost for the city’s underperforming bourse.
The launch is something of a blow for rival Singapore which, until now, had a monopoly on Chinese futures.
HKEX’s chief executive officer Nicolas Aguzin on Monday called the new product a milestone and said Hong Kong continued to be a channel for global investors to access the Chinese market.
Goldman Sachs analysts wrote in late September that the “HKEX A50” futures scheme will become the “biggest offshore traded A-share equity futures product over the medium term.”
The product may add around five percent to HKEX’s revenues by 2025, although trading volume for MSCI index-based futures is typically “negligible” for the first two years, they added.
Analysts believe it will take years for Hong Kong to catch up with Singapore given its head start on the market.
Hong Kong’s A50 futures product mirrors the sector weight allocation of the MSCI China A Index, which tracks the performance of 50 key Shanghai and Shenzhen stocks available via a Stock Connect scheme.
Singapore’s product, which was launched in 2006 and had no direct competition, tracks the FTSE China A50 Index.
Michael Syn, head of equities at Singapore Exchange Limited told Bloomberg News that Singapore’s competing Chinese futures product benefits from lower fees than Hong Kong as well as fewer trading holidays.
Singapore’s exchange also does not “shut down when a typhoon hits,” he added.
Bloomberg News contributed to this story.