China will give foreign investors more access to its commodity futures market as part of its continuing efforts to strengthen the real economy, the top securities regulator said on May 28.
The move will benefit both overseas and domestic market participants, and the opening-up of the stock index futures market will also speed up, experts said.
The country will allow overseas investors to trade more types of onshore commodity futures contracts without registering a Chinese entity, and will continuously improve the related rules, Lu Dongsheng, an official with the China Securities Regulatory Commission, told a forum on May 28.
The Shanghai Futures Exchange will open up its nonferrous metals futures contracts to foreign investors, Jiang Yan, Party secretary of the exchange, said at the same forum. The bourse will also list a new type of futures contract, TSR20 Rubber, which will be available to both domestic and foreign investors, he said.
Lu also announced other measures to develop China’s commodity futures market, such as accelerating the launch of rice and fertilizer futures, guiding more companies and fund managers entering the market, and assisting in formulating the Futures Law.
“As prices of bulk commodities fluctuated frequently and sharply in recent years, the real economy has a huge demand for risk management,” Lu said, stressing the importance of accelerating the development of the futures market amid uncertainties.
China stepped up efforts to open up the commodity futures market last year, making three futures contracts available to foreign investors so far, including crude oil, iron ore and purified terephthalic acid (PTA), a raw material for making plastics.
Accelerating the opening up of China’s commodity futures market will help foreign investors optimize their renminbi-denominated asset portfolios as they can incorporate investment targets of a wider variety, said Wang Tingting, an associate professor of finance with the Central University of Finance and Economics in Beijing.
“Moreover, as foreign investors’ trading helps boost liquidity in the domestic market and makes the price changes more consistent with international trends, domestic market participants can also better hedge against risks,” he said.
Experts also expect China to open up the stock index futures market to foreign investors, as they have large exposure in the A-share market and are therefore in need of this risk management tool.
Foreign investors’ access to onshore stock index futures is an “infrastructure” for financial market opening-up, without which foreign investors’ passion for Chinese shares may be dampened, said Wang Maobin, investment department chair at the University of International Business and Economics in Beijing.
In April, the CSRC pledged to promote the opening-up of stock index futures. At present, onshore stock index futures are unavailable to overseas investors, and they can only hedge risks associated with investing in A shares through offshore instruments.
“After the stock index futures market opens up, investor bases will diversify, helping China’s capital market achieve a higher efficiency in asset pricing,” Wang said, adding that capital market reform and opening-up is part of China’s moves to promote quality development.
“One of the key priorities this year is to accelerate the development of direct financing and the capital market, to strengthen the capital market’s capacity to promote economic growth,” Guo Shuqing, the People’s Bank of China’s Party secretary and head of the China Banking and Insurance Regulatory Commission, said in an interview with China Central Television on Monday.
The Sino-US trade tensions have had a limited impact on China’s financial markets and the effects will be “even smaller” in the future, Guo said.
Yi Huiman, chairman of the CSRC, also pledged earlier in May to continuously enhance the quality of listed firms as part of supply-side reforms in the financial sector to promote the high-quality development of the real economy.
