Outlook bright despite 22pc turnover slide

PUBLISHED : Monday, 01 January, 2001, 12:00am
UPDATED : Monday, 01 January, 2001, 12:00am

Turnover in the local futures market is tipped to increase this year after activity in almost all the 13 products traded at the Hong Kong exchange fell sharply in the past two years.

Futures traders blamed the lacklustre market on the delayed introduction of the electronic trading system and the'black' futures market operated from Macau by underground firms.

According to Hong Kong Exchanges and Clearing (HKEx), total futures market turnover dropped 22 per cent last year compared with a year earlier. Futures exchange turnover last year up to December 15 was 4.88 million contracts, compared with 6.32 million contracts in 1999.

Twelve of the 13 futures exchange products recorded a lower turnover last year. Three-month Hibor futures were the only category to register a year-on-year increase at 2.9 per cent.

Trading volume in Hang Seng Index futures, the exchange's flagship product which accounts for more than 80 per cent of turnover, dropped 24 per cent compared with 1999. To December 15, 3.87 million contracts were traded compared with 5.13 million contracts in 1999.

Hang Seng 100 Options and red chips futures were the poorest performing products as both recorded an 88 per cent decline compared with 1999.

Hang Seng 100 Options had 5,876 contracts traded, compared with 51,393 contracts in 1999.

Red chips futures trades amounted to 3,677 contracts, against 30,753 in 1999.

Turnover of foreign currency futures product Rolling Forex fell 65 per cent to 3,126 contracts compared with 9,042 contracts the year before.

Fred Grede, HKEx chief operation officer and head of the futures exchange, said the declining turnover was mainly due to problems introducing the new electronic trading system.

The futures exchange originally planned to move Hang Seng Index futures and options products from open outcry to electronic trading in August 1999 but suffered repeated delays after the new automated trading system failed a series of simulation tests.

Sunny Wong, executive director of Tai Fook Futures, said the lengthy testing of the new trading system may have discouraged traders.

The new system has also discouraged floor traders from engaging in traditional day-trading activity, which accounts for almost 30 per cent of futures market turnover, according to Mr Wong.

He expected activity to rebound this year as former floor traders became more familiar with the new system.