The Hong Kong Futures Exchange (HKFE) published an educational article today that explains how index arbitrage works. The article, which was written by Dr. Joseph Fung, a Lecturer in Hong Kong Baptist University's Department of Finance and Decision Science, and Mr. Kevin Cheng, the HKFE's Head of Economic Research, also discusses the importance of arbitrage activity, identifies impediments to arbitrage efficiency and looks at how index-futures pricing efficiency can be enhanced.

"Index Arbitrage Enhances Cash and Futures Markets' Liquidity and Stability" - the third in a series of HKFE educational articles aimed at enhancing public understanding of the futures markets and the important role they play in Hong Kong - can be found on the Exchange's web site: www.hkfe.com, under the News Centre's Special Reports section.

For further enquiries, please contact HKFE Corporate Communications Manager Miss Chiu Yeung on 2842 9322.