The soon to be launched Properties Sub-Index Futures (PSI) contract will have a contract size of about $750,000 to $800,000 and an estimated initial margin of $80,000 per contract, making it more expensive to trade than Hang Seng Index futures. The futures exchange has set a multiplier for the PSI, which will be launched on June 9, of $50 per index point, translating to a contract size of $768,100 based on the underlying PSI close of 15,362 points yesterday. The initial margin, which at $80,000 would represent about one-10th of the contract value, is still subject to a final decision by the exchange's clearing house. Hang Seng Index futures carry an initial margin of $63,000 per contract and have a contract size of about $617,300 based on yesterday's Hang Seng Index close. Exchange executive director Jimmy Ho Tseng-ming said: 'In the past, property investors could only wait for their asset prices to go up, but the launch of the PSI will allow them to hedge their positions on the upside, downside or in a sluggish market.' Mr Ho said the correlation between the underlying property sub-index and relevant real-estate price indices, such as the Vigers average office price index, for the period 1996-1998 was about 70-80 per cent, so investors could use it to manage property-related risk. The cash market sub-index is however dominated by three stocks - Cheung Kong, Henderson Land and Sun Hung Kai Properties - representing over 70 per cent of the index. This could mean the index might deviate from real-estate market trends. 'This is a proxy but not a perfect hedge,' Calvin Tai, head of the exchange's product development department, said. The exchange will also introduce a margin offset to coincide with the PSI's launch on the Hong Kong Futures Automated Trading System. The system means margins between PSI futures/options and Hang Seng futures or Hang Seng 100 futures/options can be mutually offset up to 80 per cent or above.