EXECUTIVE SUMMARY
- HKEX (388 HK) is set to launch MSCI China A50 Connect Index future on Oct 18, 2021. The debut marks the significant milestone for HKEx to diversify its earnings stream away from a heavy reliance on cash equity market volumes. With the rising volume for China A-share through Stock Connect Northbound, we believe the demand for China A50 Connect future is huge. Due to regulatory restriction in the past, there is lack of China A-share related derivative products in Hong Kong market. The to-be-launched MSCI China A50 Connect future will likely fill the gap. In longer term, this product launch is a game changer for HKEX (388 HK) derivative business. We believe the derivative business contribution to HKEx revenue will likely grow.
- We analyzed the trading volume of future contracts for Hang Seng China Enterprises Index (HSCEI INDEX) on HKEx and FTSE China A50 Index (XIN9I INDEX) on SGX (SGX SP). We estimate that ADV (Average Daily Volume) of MSCI China A50 Connect contract will likely be ramped up at 1.5-2.0x the volume of FTSE A50 at its launch. In a long-run, we believe ADV of MSCI China A50 could be more than 5x of ADV of FTSE A50 as offshore investors’ exposure on China A-share cash equity grows. This will reshape HKEx with more balanced revenue stream from both cash equity and derivative.
- HKEX (388 HK) August ADT (Average Daily Turnover) has been resilient, delivering 18% year-over-year growth in the month. The ADT for the first eight months of 2021 was up 46 per cent from the same period last year. Although China market is clouded by recent Beijing’s crackdown of big tech, we still think HKEx will play a key role on offshore China listings. We remain bullish on HKEX (388 HK).
Click here to read the full article
—
Originally Posted on October 5, 2021 – China A50 Index Future to Debut in 2 Weeks
Disclosure: Smartkarma
Smartkarma posts and insights are provided for informational purposes only and shall not be construed as or relied upon in any circumstances as professional, targeted financial or investment advice or be considered to form part of any offer for sale, subscription, solicitation or invitation to buy or subscribe for any securities or financial products. Views expressed in third-party articles are those of the authors and do not necessarily represent the views or opinion of Smartkarma.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Smartkarma and is being posted with its permission. The views expressed in this material are solely those of the author and/or Smartkarma and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Forex
There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
