HONG KONG: Chinese stock index futures have surpassed S&P 500 futures in turnover to become the world`s most traded equity futures as global investors expanded their exposure to one of Asia`s top-performing markets.
Turnover in the CSI300 futures contract expiring on May 15 has soared in recent weeks, in step with surging shares in China. Daily volumes rose to 1.5 million contracts on Friday, according to Thomson Reuters data, exceeding the 1.4 million "e-mini" S&P 500 contracts traded on that day.
Analysts predict the CSI 300 looks set to overtake futures contracts in other asset classes such as U.S Treasuries, the most heavily traded futures contract in the world for any asset type.
Turnover in CSI300 stock index futures, launched in April 2010 on the China Financial Futures Exchange, have rocketed in recent weeks on a rally in mainland share indexes. The equity benchmarks are star performers in the Asia-Pacific, with year-to-date returns of more than 30 percent in dollar terms.
The rush into Chinese equities has led to requests for higher onshore investment quotas. Exchange traded futures such as the CSI300 provide exposure to an underlying index without the need to invest in the underlying constituents. They are popular with institutional investors looking to access emerging markets or equitise their investment portfolios. The recent launch of the Shanghai-Hong Kong Stock Connect programme allowing two-way buying and selling has also spurred the cash equities market, giving stock index futures a boost.
"The success of the stock connect program and the increased market volatility means investors are looking for more products to access China markets performance than exchange traded funds, and futures are feeding that rising demand," said Andrew Sullivan, managing director of sales trading at Haitong International Securities Group in Hong Kong.
