FTSE/Xinhua China 25 Index Futures & Options

What is FTSE/Xinhua China 25 Index?

In the past few years, financial products on FXI China 25 are becoming popular in the international investment communities.  According to FXI, the total value of financial products structured on the FXI China 25 was estimated to be worth about US$3 billion as of 28 February 2005.   Why investment funds are benchmarking to FXI China 25?

FXI China 25 represents the performance of the shares in the most widely followed 25 Mainland enterprises available to offshore investors, which are traded on the Stock Exchange of Hong Kong Limited (SEHK).  The FXI China 25 is compiled by FTSE/Xinhua Index Limited (FXI), a joint venture between the FTSE Group (FTSE) and Xinhua Financial Network Limited, a wholly-owned subsidiary of Xinhua Finance Limited.  As at 31 March 2005, the free-float adjusted market capitalisation of the constituent stocks accounted in FXI China 25 exceeded HK$ 416 billion and the average daily turnover of the constituent stocks was HK$ 4.3 billion from 1 April 2003 to 31 March 2005.

Opportunities

1. Instant exposure to the performance of top 25 Mainland enterprises listed in Hong Kong

1. Cost effective tool for managing exposure in Mainland enterprises (with 3-month Exchange Fee waiver and 6-month Securities and Futures Commission Levy exemption from the launch date of the FXI China 25 Futures and Options)
2. Additional trading tool to complement the trading of Hang Seng Index and H-shares Index Futures and Options
3. Investors of structured products linking to FXI China 25 can manage their risk and exposure with FXI China 25 Futures and Options while the underlying stocks are open for trading in HKEx

Features of Using FXI China 25 Futures and Options

1. EFFICIENT EXECUTION - Investors can establish long or short positions efficiently with FXI China 25 Futures and Options linking to the performance of a basket of FXI China 25 companies.
2. COST EFFECTIVE - FXI China 25 Futures and Options require low transaction costs, compared with trading in the underlying stocks.
3. CAPITAL EFFICIENT - Trading, hedging and arbitrage can be done in a capital-efficient manner as FXI China 25 Futures and Options are traded on a margin basis, only a fraction of the value of underlying stocks.
4. HEDGING MARKET RISK - Investors and fund managers may use FXI China 25 Futures and Options to manage the risk of holding Mainland enterprises.
5. ARBITRAGE OPPORTUNITY - Traders can use FXI China 25 Futures and Options to capture the profit from temporary discrepancies between cash and derivatives markets.
6. MEETING MULTI-PURPOSE TRADING NEEDS - FXI China 25 Futures and Options can be used in combination for a wide range of trading strategies to meet different market scenarios like bullish, bearish, stagnant, or volatile markets.
7. CLEARING HOUSE GUARANTEE - Options and Futures contracts are registered, cleared and guaranteed by the Clearing House, which eliminates counter-party risk for Clearing Participants (The Clearing House guarantee does not cover a Clearing Participant's obligations to its clients.  Investors should exercise due care and diligence when deciding through whom they will conduct business with).