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News
China to launch stock index futures, short selling & margin trading |
Source:BRHG Hits:404 Date:2010-2-3 |
China has approved in principle the launch of stock market index futures as well as short selling and margin trading of stocks, the stock regulator said on Friday, giving investors badly needed hedging tools.
The reforms, approved by the cabinet in 2008 but delayed by the global financial crisis, will initially be conducted on a trial basis, the China Securities Regulatory Commission (CSRC) said in a statement on its website (www.csrc.gov.cn).
Index futures, which will be traded on the China Financial Futures Exchange in Shanghai, will take about three months to start up, while the trial period for margin trading and short selling will come relatively soon, the CSRC said.
"This is positive news for the market, and it will likely change people's investment strategies," said Huang Yan, fund manager at Guotai Fund Management Co in Shanghai.
A lack of sophisticated tools to manage risks in China's nascent stock exchanges has been a major shortcoming in the notoriously volatile market, which surged 80 percent in 2009 after falling 65 percent in 2008.
Without such hedging tools, investors have had few options to cut their losses in a falling market other than to sell shares -- accelerating the market's decline.
Looking to ease volatility, the government set up the China Financial Futures Exchange in late 2006 to launch derivatives, starting with stock index futures. However, the plan was put on hold because of the mounting financial turmoil around the world.
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