Gradual roll-out of stock index futures sought

The mainland should launch its long-awaited stock index futures in a gradual and controlled manner in order to minimise any adverse impact on the market, said Anita Fung Yuen-mei, treasurer and co-head of HSBC's global markets in Asia-Pacific.

The China Financial Futures Exchange said last month it was getting ready to unveil its first product - Shanghai Shenzhen 300 index futures - but did not give a precise timeframe. Regulators are nervous that the stock index futures could put downward pressure on underlying stock prices.

'The behaviour of retail investors in China is indeed a concern. The stock index futures should be rolled out in a gradual process,' Ms Fung said. 'It would be desirable for a selected group of participants, such as the more professional institutional investors, to first join in and test the waters.'

Stock index futures are contracts to buy or sell the value of a stock index at a fixed price on a specific future date. They also allow short selling, giving investors a tool to bet on a down market.

'But bear in mind the so-called professional investors are the ones who could cause drastic fluctuations in the stock market. If all of them bet on a market slump, it would not be good but detrimental to the stock market,' Ms Fung said.

'In that sense, regulators should be capable of balancing such market behaviour to ensure [the system] is operated in a controlled manner.'