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Index futures contracts on the way

By Li Xiang (China Daily)
Updated: 2010-03-27 09:09

Trading to debut next month, likely to change the way market works

BEIJING: The trading in the benchmark Shanghai-Shenzhen 300 stock index futures contracts will make its much-awaited debut on April 16, the China Financial Futures Exchange said on Friday.

The first contracts to trade will be for May, June, September and December. Investors must pay cash deposits equivalent to 15 percent of the contract value for May and June contracts while the minimum trading margin for longer-term contracts is 18 percent, the exchange said in a statement posted on its website.

The maximum price fluctuation was set at 10 percent above or below the benchmark listing price on the first trading day for May and June contracts and 20 percent for September and December contracts.

Trading of index futures contracts, agreements to buy or sell the CSI 300 Index at a preset value on an agreed date, will allow investors to profit from both gains and declines in the market. Chinese investors could previously only profit from gains in equity prices.

The exchange started accepting applications for opening accounts from Feb 22 for investors with a minimum of 500,000 yuan ($73,200) as deposits for accounts. The State Council officially approved the launch of the financial instrument in January.

Analysts said the launch of index futures would likely trigger a change in the style of the overall market, which has seen range-bound movements in the past few months.

"The launch is likely to boost the share prices of blue chips and big cap stocks and they will probably replace small cap stocks to lead the gains of the overall market," said Cui Jian, an analyst at Bohai Securities.

The trading contract of the index futures is based on the CSI 300 Index.