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Enoch Yiu

The number of derivatives products traded on the Hong Kong futures market grew 10 per cent last year despite an overall decline in the volume of stock market trading.

Brokers attributed the rise to the volatile stock market and increased demand by investors using derivatives to hedge their exposure.

Another reason was the fully electronic trading environment.

Hong Kong Exchanges and Clearing said 10.25 million contracts were traded in the year to December 14 - representing a 10 per cent rise on the 9.26 million contracts traded in the whole of 2000.

The strongest growth was in three-month Hibor (Hong Kong interbank offered rate) futures, up a year on year 92 per cent to 625,305 contracts traded in the year to December 14.

The products are mainly used by bankers to hedge interest-rate risks in interbank rate movements.

The 11 interest rate cuts by the United States last year meant there was greater demand for hedging.

Hang Seng Index futures continued to be the most popular product on the futures market.

In the year to the middle of last month, there were 4.23 million contracts traded -  representing 42 per cent of all futures turnover. Volume growth year on year was 5.22 per cent.

Standard Capital Commodities director Louis Tse Ming-kwong said the strong growth of the futures market was primarily a result of the volatile stock market.

The global economic slowdown, coupled with the September 11 attacks in the US, created significant market turmoil.

During the course of the year, the Hang Seng Index was down 24.49 per cent.

'When the stock market is volatile, it usually brings more trading volume for the futures market. This is because investors need to use derivatives products to hedge the risks of their stock portfolio,' Mr Tse said.

The rising star on the futures market was the mini-Hang Seng Index futures.

'There is an increasing number of retail investors who prefer to trade the mini-Hang Seng Index futures due to the lower minimum transaction amount,' Mr Tse said.

Launched in October 2000, the contract has become the third most traded product on the futures exchange - after Hang Seng Index futures and stock options.

The mini-Hang Seng Index futures is similar to its big brother in that they both use derivative products to hedge the risks of the 33 blue chips on the index.

But mini-contracts are one-fifth the size of Hang Seng Index futures.



Futures surge as players take shelter from volatile market