China will launch stock index futures soon and is ready to approve new quotas for foreign investors in the country’s red hot stock markets. The launch date has yet to be decided.

This will not be easy. Zhou Qinye, seen here, executive vice president of the Shanghai Stock Exchange, the bigger of mainland China’s two bourses, told a financial forum that the start of futures trading might initially increase selling pressure on the cash market.

He did not elaborate on the exact timing of the launch but added that conditions were ripe for a stock futures market and preparations had been made.

China is trying to develop a stock futures market to give investors more options and help them hedge risk.

The introduction of futures has been delayed, partly because of concerns that it could destabilize the stock market.

Zhou Qinye said, ‘China’s stock market is still an emerging market that is in the process of transformation. So you will see lots of new things to happen during the process.’

China’s main stock index has more than doubled so far this year, while Chinese companies have turned in explosive profit growth in the January-September period.

Zhou Qinye said Chinese regulators had started the process of approving new quotas for foreign investors in an effort to diversify the types of active investors. But Beijing’s approval process would be ‘gradual’.

However, the eventual launch of China’s stock index futures could happen before the end of this year.
Source: Reuters