Chinese futures traders turning to Singapore

SHANGHAI • Chinese brokerages ruing the collapse of futures trading are pitching clients similar contracts in Singapore.

"Goodbye, China Financial Futures Exchange; Hello, FTSE A50!" reads an advertisement by a unit of Shenzhen-based Essence Securities on the WeChat messaging service, referring to Singapore-traded futures on an index of the biggest mainland companies.

China's domestic equity futures market, ranked the world's busiest as recently as July, has seen volumes plunge 99 per cent since June as policymakers curbed leverage and position sizes and announced probes into "malicious" short-sellers.

That has left brokerages, which boosted staff numbers by 50 per cent since 2011, turning to promoting contracts on the SGX FTSE China A50 Index as an alternative.

"Investors and hedge funds are showing great interest in switching to overseas markets," deputy general manager Zhu Bin of Hangzhou- based Nanhua Futures said. "Foreign investors who have positions in mainland equities will also turn to Singapore to hedge their positions."

Volume in Singapore-listed front- month futures on the FTSE A50 gauge rose to 281,000 contracts on Monday, more than 10 times the number that changed hands on the CSI 300 Index. At end-June, 3.2 million contracts were being traded a day on the mainland Chinese gauge.

Trading in both futures markets soared as China's benchmark stock index rallied by over 150 per cent in the 12 months through the June 12 peak. The Shanghai Composite Index has since fallen 41 per cent, helping to erase US$5 trillion (S$7 trillion) of value on mainland bourses. The equity measure slid 3.5 per cent at the close, as mainland and Singapore futures declined.

Increased interest in FTSE A50 index contracts would benefit the Singapore Exchange. South-east Asia's biggest bourse posted a 24 per cent rise in profit in the three months to June 30 as the rally in Chinese stocks spurred demand for derivatives.

While volumes on the FTSE A50 index futures hit the highest level since Sept 2 on Monday, trading has waned as China's equity boom turned to bust. The 30-day average has fallen to about 301,000 contracts, from mid-July's high of 641,000 .

China Financial Futures Exchange declined comment, while Singapore Exchange was not immediately available for comment.

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A version of this article appeared in the print edition of The Straits Times on September 16, 2015, with the headline 'Chinese futures traders turning to Singapore'. Print Edition | Subscribe