Hong Kong bourse to start offering China A share index futures

[HONG KONG] Hong Kong's exchange was cleared to start offering long awaited A share index futures contracts, giving global investors a new tool to hedge China risk.

Hong Kong Exchanges & Clearing said on Friday it had signed an agreement with MSCI to launch futures contract based on the MSCI China A 50 Connect Index, tracking performance of 50 Shanghai and Shenzhen stocks available via Stock Connect.

The product will be launched on Oct 18, according to a statement. The "new product will act as a key risk management tool for investors in managing their A-share equity exposure," chief executive officer Nicolas Aguzin said in the statement.

The move came after the bourse was granted approval by the city's Securities and Futures Commission and the mainland regulator. It will bring China closer to an expanded inclusion in major global indexes. MSCI has listed a lack of access to hedging and derivatives as one pressing issue for the Chinese market. The MSCI and HKEX first agreed on a pact to issue A share futures back in 2019.

The SFC said in a statement that the instruments will provide a significant new risk management tool and enable further growth of capital flows into the mainland.

In a separate statement, China Securities Regulatory Commission gave its support for the launch and said it will continue to work with the SFC on derivatives regulations and cross-border risk management.

BLOOMBERG