Hong Kong Exchanges and Clearing Limited (HKEx) will introduce H-shares Index Futures for trading on the Hong Kong Futures Exchange, a wholly-owned subsidiary of HKEx, on Monday, 8 December 2003.

The H-shares Index Futures are the latest product offered by HKEx to meet the growing needs of investors who are interested in China related-securities. As the Mainland economy continues to expand rapidly, there is growing interest among institutional investors and individuals in China-related products, said Patrick Conroy, HKEx chief operating officer. In addition to representing an effective hedging mechanism, H-shares Index Futures will provide excellent opportunities for investors to benefit from movements in the prices of H-shares.

The underlying index for H-shares Index Futures is the Hang Seng China Enterprises Index (HSCEI). The HSCEI is a market capitalisation-weighted stock index compiled by HSI Services Limited. The index currently comprises 32 Main Board-listed H shares with a combined market capitalisation of $236 billion (as of 20 October 2003).

The Contract Multiplier for H-shares Index Futures will be $50. At the index level of 3,700, the contract value would be $185,000. There will be four Contract Months available for trading: spot month, next calendar month and next two calendar quarter months (the calendar quarter months are March, June, September and December). At the launch, the Contract Months available for trading will be December 2003, January 2004, March 2004 and June 2004.

HKEx has a proven record of offering China-related securities. H-share companies have raised more than $150 billion through initial public offerings in Hong Kong since the first H share listing in July 1993. Today there are a total of 83 H shares listed in Hong Kong, and they play an important role in the HKEx securities market. In the first nine months of this year, H shares accounted for about 17 per cent of the Hong Kong securities markets daily turnover value.

In HKEx's pre-launch communications with active Futures Exchange Participants, many firms expressed interest in H-shares Index Futures.

Given the broad interest in China-related investment instruments, we believe the H-shares Index Futures contract has great potential, Mr Conroy said. However, one must realise the importance of taking a long-term view when introducing any new financial product. New products often take some time to develop. As such, at this time we do not have any specific volume or open interest targets in mind for H-shares Index Futures.

HKEx plans to organise a series of marketing activities and incentive programmes, some in association with Futures Exchange Participants, to build market awareness of the new product prior to its launch. HKEx will announce the details shortly.