HKEx preparing to launch CES 120 derivative

Hong Kong Exchanges and Clearing Limited (HKEx), one of the world's largest exchange operators by market value, plans to soon introduce a new stock index-linked derivative product, CES China 120 Index (CES 120) futures, amid ongoing efforts to enhance financial cooperation between the mainland and Hong Kong, the exchange announced Monday.

The CES 120 futures contract was designed by China Exchanges Services Company Limited (CESC) - a joint venture formed between HKEx and stock exchange operators in Shanghai and Shenzhen - to track the performances of the largest and most liquid Chinese stocks trading in both Hong Kong and the mainland, according to statements on HKEx's official website. The contract, which is set to become the financial market's first exchange-traded futures derivative linked to both A-shares and H-shares, is slated to start trading on July 8 following regulatory approval.

"The product is expected to give institutional investors a new tool to minimize the risks facing their Chinese equity holdings," Zhang Qinzhi, an index futures analyst at Everbright Futures, told the Global Times Tuesday.

The contract was also billed as another step toward deeper financial ties between the mainland and Hong Kong.

"The launch of the CES 120 will be a milestone in our equity derivatives strategy of building on our current business and offering an extensive product suite across Hong Kong and the mainland," Charles Li, chief executive at HKEx, said in the exchange's statement. "We will continue working with our CESC joint venture to offer … products with underlying China-related securities and rolling out cross-market and A-share-related products based on CESC indices."

Yet given the current existence of stock index futures at mainland bourses, Zhang speculated that the CES 120 futures may only serve overseas investors.

"Nevertheless, it will be hard to predict the impact the new contract will have on the A-share market," he remarked. "Theoretically speaking, the domestic market isn't likely to feel much influence from the derivative, but the differing valuation standards between the mainland and Hong Kong may leave some impression on sentiment."

HKEx also stated Monday that it intends to roll out futures contracts for three A-share exchange traded funds (ETFs) on June 10, pending regulatory approval, in another attempt to give local investors more options when it comes to mainland-related securities derivatives.