China should increase its pace to introduce stock index futures to counter rising market fluctuations and boost capital flows, industry experts told the Lujiazui Forum during the weekend.
''Without tools to weather risks in the stock market, the losses will be huge,'' said Zhu Li, chairman of China Galaxy Financial Holdings Co. ''The stock index futures will definitely help.''
Zhu said the introduction of stock index futures can shore up liquidity and reduce the volatility in stock-price movement. ''We should seek ways to let capital flow quickly,'' he said.
China is expected to launch its first stock-index futures this year after postponing it by nearly two years.
The first index futures will be based on the country's benchmark CSI 300 Index, which tracks the biggest 300 firms listed in Shanghai and Shenzhen by market value. Regulators have pledged to introduce more financial derivatives after the launch.
''Although the market is talking about risk controls and management, we actually lack mechanism and methods,'' said Zhu Yunlai, president of China International Capital Corp. ''The index futures can create a risk-hedging system to help stabilize the market.''
China's benchmark stock index in Shanghai started to slide from its October highs and has tumbled by as much as a half in April, prompting the central government to roll out supportive policies including a stamp duty cut.
''I believe if we had stock index futures during this round of correction, there would not have been so-called panic selling,'' said Yang Maijun, president of the Shanghai Futures Exchange, which trades commodity futures.
Zhu Yuchen, executive president of the China Financial Futures Exchange, where the futures will be traded, has said that the derivative will be launched prudently.
(Shanghai Daily May 12, 2008)
