Dalian Commodity Exchange calls for futures funds to attract institutions

PUBLISHED : Saturday, 08 March, 2008, 12:00am
UPDATED : Saturday, 08 March, 2008, 12:00am

The Dalian Commodity Exchange, one of the mainland's three main futures exchanges, is urging Beijing to allow the establishment of commodity futures funds in an attempt to draw more institutional investors into the country's burgeoning futures market.

'The proportion of institutional investors in the country's futures market is too low, at only about 5 per cent, and the rest are individual investors,' said Liu Xingqiang, the exchange's president and chief executive told the South China Morning Post.

Most of the current institutional investors are enterprises and trading companies engaged in business related to specific futures products.

'For further development of the futures market, there must be a higher proportion of institutional investors and more futures products,' he said.

Mr Liu also urged the government to allow companies to use bank borrowings to hedge in the futures market, while continuing to prohibit bank borrowings for speculation.

Dalian, the biggest agricultural commodities futures trading centre in the country, is working feverishly to devise new products and deepen liquidity pools to cater for the increasingly diverse needs of the country's surging economy.

The bourse, based in Liaoning province, aims to launch hog, coking coal and rice futures.

'We're doing research on such products, although, it is still hard to tell when we can launch them,' Mr Liu said. Launching new products needs approval from the China Securities Regulatory Commission.

The combined turnover of the country's three commodity futures exchanges, which include the Shanghai Futures Exchange and the Zhengzhou Commodity Exchange, totalled 40.97 trillion yuan (HK$44.85 trillion) last year, up 95 per cent from 2006.

The aggregate trading volume of the three exchanges rose 62 per cent from a year earlier. More than half of the transactions were completed on the Dalian bourse.