China opens index futures to foreign investors

Beijing decided to allow qualified foreign institutions to trade in its stock-index futures, in a measure to open its capital market to overseas investors.

The permission was deemed a result of this week’s two-day China-US Strategic & Economic Dialogue (SE&D) in Beijing.

Chris Ruffle, who helps US$19 billion as China co-chairman of Martin Currie in Shanghai, said that the institution will be “on even terms with (Chinese) domestic investors” to trade the indexes.

The move will widen investment options for overseas institutions in the world’s third-biggest stock market by value.

QFII, or qualified foreign institutional investors, have been able to invest in the yuan-denominated Chinese A shares. The total combined quota for QFII funds is US$30 billion.

Futures, or agreements to buy or sell the CSI 300 Index at a preset value, began trading on the China Financial Futures Exchange in Shanghai on April 16, while margin trading and short selling was introduced March 31.

The CSI 300, which tracks 300 of the largest companies on China’s two equities exchanges, has dropped 21 percent this year on concern government measures to cool property market will hurt corporate earnings.

The Shanghai Composite Index has slumped 20 percent this year after surging 80 percent in 2009.
Opening up the futures markets to foreign investors may reduce volatility by allowing more participants to place strategic bets, analysts said.

By People's Daily Online