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Stock Index Futures? Not Ready Yet

Rhetoric is not enough. After expressing their enthusiasms in stock index futures, Chinese brokerage firms and fund companies remained absent from the trading floors. Despite the market expectations for these institutional investors to induce steady stream of liquidity to stock index futures market, private equity and hedge funds are the ones who poised to positions to benefit from the arbitrage.

Venus Fan 17.05.2010

Rhetoric is not enough. After expressing their enthusiasms in stock index futures, Chinese brokerage firms and fund companies remained absent from the trading floors. Despite the market expectations for these institutional investors to induce steady stream of liquidity to stock index futures market, private equity and hedge funds are the ones who poised to positions to benefit from the arbitrage.

As of May 16th, only one brokerage firm –GF Securities, passed the board meeting and applied for the license to trade stock index futures. And that is few steps away from setting up the transaction account.

Although Chinese mutual funds share the same goal with the hedge funds to seek for absolute returns, they are rather timid when it comes to the use of stock index futures. Compared to their hedge fund counterparts, the practice is obscure and the exposure remains low. It is mostly commonly seen in index funds to enhance their index tracking performance. In addition, there is the industry wide problem – quantitative investment professionals are few and far between. 

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Venus Fan  

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