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Margins down for stock futures

By Wang Fei’er (Global Times)

08:12, June 29, 2012

The China Financial Futures Exchange (CFFEX) announced Wednesday that it will cut stock futures margins for investors to 12 percent of contract value, down from 15 percent, effective Friday, a move that a CFFEX spokesperson surnamed Xu explained to the Global Times could reinvigorate the country's weak equity market.

Since April 2010, stock futures in China have been traded based on the CSI 300 Index, a gauge of 300 Shanghai- and Shenzhen-listed A shares.

Following the pledge to bolster the stock futures market by lowering investors' costs, stock index futures opened higher Thursday, with the most traded contract advancing 6.4 points to open at 2,461.20.

This is not the only time this year that the CFFEX has rolled out incentives aimed at giving the sluggish stock futures market a lift.

In February, the exchange allowed investors to conduct arbitrage trading for the first time since the launch of the country's futures market in 1990. On June 1, the CFFEX also lowered transfer fees on stock futures by 30 percent.

As a broadly used hedging tool, stock futures with lower margin requirements will likely encourage investors to hold out over the long run in China's currently dismal stock market, said Zhang Xiaolu, a stock futures analyst with Zhejiang New Century Futures.

This move will be especially appealing to institutional investors experienced with financial derivatives, and help balance the funding sources flowing into China's equity market, which is currently dominated by retail investors, according to Zhang.

Meanwhile, by lowering margin requirements for stock futures, which are currently the only financial futures contracts available in the country, regulators may be hoping to expand the investor pool in anticipation of upcoming futures, such as treasury bond futures, Jian Bijia, a stock futures analyst from Shenyin & Wanguo Securities, told the Global Times.


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