China should normalize stock index futures trading, regulator says

[SHANGHAI] China should scramble to resume normal trade in stock index futures, a top Chinese securities regulator said on Monday, in an effort to satisfy the risk management needs of both domestic and foreign investors.

The easing gesture, which came after a fall of about 14 per cent in the stock market this year amid a nascent trade war with the United States, points to regulators' commitment to free up financial markets.

Reuters reported the news earlier on Monday, citing sources.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), also told a meeting in the Chinese capital that regulators would continue to work toward giving commercial banks access to the country's bond futures market.

Mr Fang's comments, posted in a statement on CSRC's website, suggest the government is about to lift the tough curbs on stock index futures trading it imposed during the 2015 market crash.

China sharply raised margin requirements and tightened position limits at the time.

The CSRC also blamed foreign and domestic short-sellers for worsening a crisis that sent shockwaves across global financial markets.

But there were fewer signs of direct government intervention during last month's panic selling, driven by the Trump administration's imposition of tariffs on some Chinese exports and threats to impose more.

China gave licences to global hedge fund managers Bridgewater Associates LP and Winton Group to launch products in the country, a move seen as underscoring Beijing's commitment to financial deregulation.

Although China has been gradually loosening curbs on index futures trading, investors have complained its rules are still too rigid.

The inclusion of Chinese stocks in MSCI's emerging market benchmark has increased the urgency of further deregulating the derivative market, because foreign investors have long complained over the lack of hedging tools in China.

At the meeting, Mr Fang also said the government would roll out more financial options and bond futures products.

Last week, China released draft rules for the trading of two-year government bond futures, a long-awaited step toward liberalising rates at the short end of the yield curve.

REUTERS