CME plans to offer China stock futures

CME plans to offer China stock futures


HONG KONG, 0514(Reuters) - The Chicago Mercantile Exchange (CME) plans to offer futures contracts on the FTSE/Xinhua China 25 stock index, tapping strong interest in the booming Chinese economy and complementing its yuan futures launched last year.

The index tracks Hong Kong-listed shares of the top 25 blue-chip Chinese firms, giving investors exposure to companies such as China Mobile Ltd. (0941.HK), PetroChina Co. Ltd. (0857.HK: ), Industrial and Commercial Bank of China Ltd. (1398.HK:) and China Life Insurance Co. Ltd. (2628.HK:).

"We feel there is a lot of growth potential for us as an organisation in this region," Tina Lemieux, managing director, product and services told a media briefing in Hong Kong on Wednesday.

Due to be begin trading on May 20, the CME E-mini FTSE/Xinhua China 25 index futures will be denominated in U.S. dollars and offered along with other CME products on the Globex trading platform with 24-hour access, strong selling points for the new contract, Lemieux said.


Hong Kong's bourse, the Hong Kong Exchanges and Clearing Ltd. (0388.HK: ), has been offering futures on the FTSE/Xinhua China 25 index since May 2005. They are denominated in Hong Kong dollars and trade during local exchange hours.

Trading volume for the first two months of the year rose 43.1 percent to 1,235 contracts from a year ago, but it remained well below other contracts such as the Hang Seng index futures, which had 2.4 million contracts traded over the same period.

Still, Lemieux said the new product was borne out of strong customer demand. Last year, Chinese shares traded in Hong Kong <.HSCE> rallied nearly 100 percent, while mainland Chinese stocks tracked by the Shanghai Composite Index <.SSCE> surged 130 percent.

The recent volatility in equity markets has made this a great time to launch the contract, she added.
"For better or for worse, we thrive on volatility. We've our highest volume gains when markets are volatile," she said.

Lemieux said during a recent sell-off in U.S. technology stocks for example, many investors who had exposure to even just one technology stock would use the CME Nasdaq futures as a proxy to hedge their exposure to the sector.

"It's similar with the FTSE/Xinhua. While they may not have exposure to the 25 stocks that make up that index, they may have exposure to five, but that index will be enough of a proxy that they can still hold on to their stocks and sell the index to cover the potential loss, until the market recovers."

CME said it would be the first U.S. exchange to list futures on Chinese equities.