CME Group sees Chinese hedge funds, state-owned firms driving Asia growth

[HONG KONG] China's 2015 market crash sparked a surge in Asian trading for futures exchange giant CME Group as Chinese funds hedged their risk offshore and growth prospects remain strong, the bourse's head of Asia said on Tuesday.

Christopher Fix, managing director for Asia for Chicago-based CME, said the bourse expects to see volumes lifted as China's state-owned enterprises, driven by Beijing's reform agenda, move to better manage their commodity and currency exposures.

"We are attracting a whole new different client base. There is a whole new hedge fund complex that's developing in China around asset managers," Mr Fix, who's based in Singapore, told Reuters.

"If you look at any of the exchanges' volume in Asia after August of 2015, you will see a lot of these guys were positioning themselves to take macro global positions, or to participate in exchanges offshore - and you will definitely see an uptick from that."

Chinese regulators cracked down on both financial index and commodities futures trading in the wake of the July-August 2015 market crash, raising trading margins, hiking transaction fees and imposing trading limits.

This prompted many of China's roughly 8,000 domestic hedge funds to set up offshore in markets such as Hong Kong and, to a lesser extent, Singapore, to trade overseas-listed futures products.

"It is a natural evolution of the growing client base and the sophistication of the traders onshore," Mr Fix said.

"They need much more than what they are getting from plain vanilla futures exchanges onshore."

In 2016, the average daily volume of CME contracts traded in the Asia-Pacific trading day rose 15 per cent from a year earlier to 630,000, according to data from the group, one of the world's largest exchange operators.

This compares to a 12 per cent increase last year in CME Group average daily trading volume globally, with record trading volumes in metals, energy and interest rate futures and options contracts.

Mr Fix also said the group is seeking to demonstrate to Chinese state-owned enterprises the value of hedging "to help them smooth out some of their raw material costs and currency risks".

REUTERS