CRI听力: China to Start Stock Index Futures Trading in April

A ceremony for the start of stock index futures trading was held this afternoon in Shanghai, marking a long-awaited milestone in the development of China's capital markets. The move is expected to lay the groundwork for more innovations down the road.

Let's take a closer look with reporter Liu Min.



Long-awaited stock index futures will formally make their trading debut on April 16th, allowing investors to bet on the direction of index movements and hedge risks. As early as February, investors were allowed to open accounts to trade stock index futures. Up to now, nearly 3,000 investors have their accounts across the country. Some securities firms say they hope more investors will open accounts to trade the stock index futures as the formal start date for trading approaches.

Tu Jiang is Manager of Zhejiang Yong'an Stock Index Futures.

"Now most investors are still waiting and seeing. Fewer than 100 have opened accounts with us now. Investors who have applied for trading accounts are required to have a minimum of 500 thousand yuan. Many who invest in stock don't have such amounts of money to do these kinds of trades."

Besides higher entry-level requirements, there are also other game rules for investors to follow. They are required to put down cash deposits equal to 15 percent of a contract's value for May and June contracts as a maintenance margin. For September and December contracts, the margin is 18 percent. A 0.05 percent transaction fee will be levied on the total turnover.

Many brokerage firms have organized a series of simulated trading competitions for clients to warm up before formal trading begins.

Tu Jiang says while stock index futures are still new products for many investors, the government hopes the market can develop stably.

"It is more like futures trading, as stock index futures share similar trading methods, strategies and regulations. So our suggestion is if you really want to invest in this market, it would be better to begin with learning."

Stock index futures are agreements to buy or sell an index at its present value on a future date. They will provide investors in China with a badly needed risk-hedging tool in a volatile market.

Stock index futures are also the most heavily traded vehicles in the global futures markets, but have a mixed reputation. They were once hailed by economists as an effective tool in hedging, but also found to be a key cause of the 1987 market collapse in the United States.

Rollercoaster rides in the Chinese mainland's stock market have resulted from a lack of stock index futures and short-selling. When most investors bet against the market, they sell shares whose values plunge quickly.

With futures trading and short-selling in place, a future downswing could bode well for investors and prevent a massive flight of funds from the market.

Analysts say this has made it all the more imperative for the Chinese securities regulator to usher in stock index futures.

Zhang Yuzhen is a manager at the China Financial Futures Exchange.(www.hXen.com)

"Stock index futures themselves are not angels or demons or Noah's Ark. They are just a financial management tool."

Analysts say the potential for Chinese stocks is substantial, and the stock index futures market could grow to be several times the size of the current shares market.

For CRI, I'm Liu Min.