September 2006
Singapore has launched overseas futures many times in the past, among which the Nikkei 225 stock index futures are the most successful. This is not the first time for China. Prior to this, HKEx has listed H-share index futures and Xinhua FTSE China 25 index futures (H-share+red chip), and CBOE Futures Exchange (CFE) has also launched China index futures (China stocks listed in the United States). However, although these stock index futures are related to China, they have not attracted the attention of the mainland capital market, because they are not stock index futures issued on the basis of A shares.
The opening of China financial futures market, especially stock index futures and options, has always been a hot topic. With the formal establishment of China's financial futures exchange, it also indicates that China's stock index futures will be launched soon, which will naturally attract global attention. We noticed that Singapore Exchange (SGX) took the lead in listing China A-share stock index futures, and officially listed stock index futures based on China A50 index compiled by FTSE Xinhua on September 5th. Then, will China A50 index futures calculated by A shares affect China domestic stock index futures listed later? Will it affect the development of other financial derivatives?
We believe that the early launch of FTSE/Xinhua China A50 index futures will more or less affect the Shanghai and Shenzhen 300 index futures, but to what extent? We might as well analyze the investor structure, contract design and market support environment of these two stock index futures respectively.
First of all, as far as the investor structure is concerned, the biggest difference between the Shanghai and Shenzhen 300 Futures Index and the Xinhua FTSE A50 Futures Index lies in their respective investor structures. Participants in the Singapore market are mainly overseas institutional investors, including QFII, which invests in China's domestic market. Participants in China's domestic market will be all kinds of institutional and individual investors, and it is expected that there will be more individual investors in the initial stage. In addition, overseas institutional investors generally have mature investment concepts and operational experience, while domestic investors in China generally do not have relevant investment experience, so China's domestic market will inevitably be influenced by the Singaporean market. However, because the RMB capital account is not convertible, although overseas institutions have mature investment experience and huge financial strength, they can't invest heavily in China's domestic stock market, so they can't grasp enough spot. As a result, Xinhua FTSE A50 futures index can only follow the A-share market, so it is difficult to make multi-futures index before pulling the stock index, or short the futures index before pressing the stock index. The above pricing method is not easy to implement. In other words, the Singapore market has no substantial guiding mechanism for China's domestic market. Of course, with the increase of QFII quota and the gradual liberalization of RMB capital projects, the situation may change.
The second point is about contract design. SGX has mature experience in derivative product design. Xinhua FTSE A50 Index Futures aims to compete with China's Shanghai and Shenzhen 300 Index Futures. Therefore, in contract design, we strive to reflect its differences. The main differences are as follows:
(1) The trading time is different. Judging from the current discussion draft, the trading time of Shanghai and Shenzhen 300 futures index is 9: 15: 15, while that of Xinhua FTSE A50 futures index is 9: 15. 15:05, and there is still 15: 40 at present. When there is a major event in the market (China often releases major news after the market closes), if the domestic market in China is closed and the Singapore market is still trading, then funds will be attracted to the Singapore market.
(2) The price limit is different. The price limit of the Shanghai and Shenzhen 300 futures index is initially set to plus or minus10% of the settlement price of the previous trading day; Xinhua FTSE A50 refers to the segmented price limit, but if the market continues to rise, there is actually no price limit. Therefore, a more relaxed price mechanism is conducive to market price discovery, especially when major events occur in the market. Once China's domestic market loses liquidity due to price limit, investors can only turn to the Singapore market.
(3) The method of determining the final settlement price is different. Shanghai and Shenzhen 300 refers to the final settlement price of the arithmetic average price of all index points within the last 1 hour of the maturity date of the Shanghai and Shenzhen 300 Index, and Xinhua FTSE A50 refers to the final settlement price of Xinhua FTSE China A50 Index. Taking the average price of the underlying index for a period of time on the last trading day as the final settlement price can effectively increase the manipulation cost of speculators and inhibit speculators from manipulating the settlement price. However, the settlement price generated by this method may deviate from the final transaction price in the spot market, especially when the spot market fluctuates greatly during the calculation of settlement price. Because the FTSE A50 futures index of Xinhua takes the final closing price as the settlement price, domestic investors in China should also consider the influence of the futures index when judging the spot price on the final settlement date.
(4) There are also differences between Shanghai and Shenzhen 300 Futures Index and Xinhua FTSE A50 Futures Index in margin level, contract varieties, contract value and other aspects. The margin level of Xinhua FTSE A50 futures index is much smaller and the leverage effect is stronger, which helps to enhance its attractiveness and price discovery function. Xinhua FTSE A50 refers to two consecutive months, plus four consecutive quarters of March, June, September and1February, so there are six contracts trading at the same time, two more forward monthly contracts than the Shanghai and Shenzhen 300 Index, although the trading of forward contracts is generally inactive.
In addition, the contract multiplier of Xinhua FTSE A50 futures index is $65,438+00, and the contract value is about $50,000 (about RMB400,000). At present, the contract multiplier of China's stock index futures is 300 yuan RMB. Because of the great difference between the A50 index and the Shanghai and Shenzhen 300 index, if the US dollar is calculated at 6.28 yuan, the A50 index is about 70% of the Shanghai and Shenzhen index.
Third, in addition to market access, other market supporting mechanisms such as tax policy and arbitrage mechanism will also have an impact on transaction activity and pricing efficiency. As the first financial center in Asia to set up a financial futures market, Singapore has a developed financial futures market and a relaxed financial environment. Its low transaction cost and tax burden are one of the reasons for the success of Nikkei 225 index futures. Judging from the Shanghai and Shenzhen 300 Index, (the exchange charges 0.25 per 10000), which is about 18 yuan for reference of 2400. It is worth noting that this is a two-way charge, that is, opening a position.
As far as pricing efficiency is concerned, a market with smooth arbitrage mechanism must have higher pricing efficiency. At present, China's domestic margin financing and securities lending business is about to be launched, but the margin financing and securities lending business is actually subject to many constraints and restrictions. The growth of margin financing and securities lending business needs to go through a development process, mainly short-term financing. Without short selling, stock index futures will be undervalued, as will Singapore A50 Index and Shanghai and Shenzhen 300 Index. However, if the institution holds a large number of stocks, even if the market lacks a short-selling mechanism, the institution can still arbitrage by buying futures index and selling stocks, so that the futures index will not be significantly underestimated. From this point of view, the market with more cash has higher pricing efficiency, and China's domestic market has more advantages.
Based on the above analysis, it can be seen that the initial main investors of Xinhua FTSE A50 futures index are isolated from the spot market, and this product will not have a great impact on China's domestic market and the upcoming stock index futures in the short term, so the impact of stock index futures on China's domestic market will not be too great. However, the recent development of A50 futures may have a significant negative impact on China's domestic capital market through international arbitrage funds.