Index launch of exchanges' joint venture clears way for derivatives

A joint venture of Hong Kong, Shanghai and Shenzhen stock exchanges will launch two new indices today and will this month allow the first batch of financial companies to use the indices for launching derivative products.

China Exchanges Services, the HK$300 million joint venture in which Hong Kong Exchanges and Clearing, Shanghai Stock Exchange and Shenzhen Stock Exchange hold equal stakes, will also issue its own futures products in the third quarter.

Those futures products would be traded in the city's futures exchange platform, said the venture's chief executive, Bryan Chan Ping-keung.

"Many fund houses and financial firms have expressed interest in using our indices for issuing exchange-traded funds, warrants and other structured products," Chan said. "We believe the first authorisations would be made this month."

He did not disclose the names of the companies that are expected to get the first shot at the new indices but brokers believe these would be among the companies that have been cleared to issue cross-border ETFs.

ETFs are index funds listed on stock exchanges. They trade like any other stock but the traded units in effect track the broader exchange, allowing investors to invest in a basket of stocks.