QFII may trade index futures

08:38, January 27, 2011      

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Analysts expect overseas investors to be allowed to trade China's stock index futures late this year, after the regulator unveiled a draft plan to let them trade the derivatives.

The move will help qualified foreign institutional investors hedge their securities risks while improving the country's futures market that is now dominated by commodity trading.

The qualified foreign investors must keep their daily value of futures contracts within the investment quota approved by the State Administration of Foreign Exchange, according to the draft plan released by the China Securities Regulatory Commission on Tuesday.

The limits on transaction volume are also imposed on Chinese brokerages involved in trading index futures to ensure "risks are under control," the draft said.

The public have until February 12 to voice their opinion on the draft.

The CSRC may further open the market to foreigners if the index futures market develops well, Cao Guobao, an analyst at Everbright Securities, told Sina.com.

The introduction of foreign investors, however, will not make a difference to the mainland markets as they are constrained by the investment quota while only a small group of overseas investors is eligible for the QFII scheme, Cao added.

By the end of December, SAFE has approved 97 QFII institutions with a total investment of US$19.72 billion.

Source: Shanghai Daily
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