THE Hong Kong Futures Exchange is waiting for the right market sentiment before it launches into H shares and interest rate products. Ivers Riley, the exchange's chief executive, said a decision to launch the products would be 'market-driven'. In recent months, he has indicated the exchange's intention to implement the move. Tony Yung Ka-cheung, head of China research at Tai Fook Securities, said the market was not ready for H-share futures. He said about four H-share companies made up more than 50 per cent of the market capitalisation of the Hang Seng China Enterprises Index. 'Futures trading in this case would be easily manipulated,' Mr Yung said. There are 17 H-share companies trading in Hong Kong. An individual H-share company's market capitalisation should be less than 10 per cent of total market capitalisation. Mr Yung suggested that there should be at least 30 such companies to make futures trading feasible. Strong interest had recently been expressed in ways that the futures exchange might expand its product portfolio. Mr Riley said the exchange had had a good start-up in currency futures products. In November last year, it launched into 'rolling forex' trade, aimed at retail investors, and staged a campaign to attract business. Mr Riley said the exchange had achieved an average daily volume of 773 deutschemark and yen contracts. Daily turnover was about US$35 million. He said the exchange was considering including sterling, Swiss francs, Australian and Canadian dollars, and Ecus. Wheelock NatWest became the exchange's sixth market marker in currency futures. Foreign exchange margin trading was available through banks and leveraged foreign exchange traders. Mr Riley said the exchange was considering granting banks special membership in the rolling forex programme to increase volume. The exchange said it had overcome a technical problem and would be able to provide a five-point spread. A proposal to link the exchange with the Philadelphia stock exchange for currency options, and another for electronic trading of domestic stock futures, were under consideration, Mr Riley said.
