Newly open commodity futures, commodity options, stock index options——
What does the expedited opening of the futures market mean?
China's capital market opening to the outside world has gone a step further.
A few days ago, the People’s Bank of China, the State Administration of Foreign Exchange, and the China Securities Regulatory Commission announced that qualified foreign investors can participate in financial derivatives trading. Three new types of commodity futures, commodity options, and stock index options have been opened. The purpose of participating in stock index options trading is limited to hedging. The transaction will take effect on November 1, 2021.
The reporter learned that this means that all commodity futures, commodity options and stock index options in China's futures market are open to QFII (Qualified Foreign Institutional Investors) and RQFII (RMB Qualified Foreign Institutional Investors).
Among them, the trading purpose of participating in stock index options is limited to hedging transactions.
Previously, stock index futures in financial futures had been opened, and they were also limited to hedging transactions.
However, treasury bond futures in financial futures are not included in this opening.
The depth of the futures market has been able to carry "big ships"
On September 25, 2020, the China Securities Regulatory Commission, the People’s Bank of China, and the State Administration of Foreign Exchange issued the “Measures for the Administration of Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors” (known in the industry as “QFII New Regulations”) ) And supporting rules, and will be implemented on November 1, 2020.
Among them, the content of steadily and orderly expanding the investment scope of QFII and RQFII has been added. Financial futures, commodity futures, options, etc. are all listed, but specific trading varieties and trading methods will be gradually opened up. Announced after consent.
After a lapse of one year, the relevant content officially landed, in line with the principle of steady and orderly gradual opening of China's financial market.
The State Administration of Foreign Exchange's "China Balance of Payments Report for the First Half of 2021" shows that in the first half of 2021, the net inflow of foreign investment in China's securities was US$118.4 billion, a year-on-year increase of 84%.
Among them, the net inflow of equity investment was 39.4 billion U.S. dollars; the net inflow of bond investment was 78.9 billion U.S. dollars.
Since the beginning of this year, there have been three main channels for overseas investment in China’s securities: one is Bond Connect, the direct entry of the inter-bank bond market, and the overseas bond issuance by Chinese institutions, with inflows of US$65.4 billion; the second is “Shanghai Stock Connect” and “Shenzhen Stock Connect”. , Inflows of US$34.6 billion; third, QFII and RQFII, inflows of US$9.3 billion.
The data shows that the total position of foreign investment in China’s financial derivatives as of the end of June 2021 is only 8.5 billion US dollars, while the total investment in securities has reached 210.9 billion US dollars. It can be seen that overseas investment in China’s financial derivatives is very small, specifically QFII And there are even fewer under RQFII.
However, foreign-funded institutions have great demand and interest in entering China's futures market.
In addition, after 30 years of development in China’s futures market, the futures product system has been continuously improved, pricing quality and influence have been continuously enhanced, and the volume of commodity futures trading has ranked first in the world for many years.
Luo Xufeng, vice chairman of China Futures Association and chairman of Nanhua Futures, said in an interview with the Economic Daily that the total amount of margin in the futures market has reached 1,166.6 billion yuan, indicating that the "water" of the market is deep enough and the depth and breadth of the market is sufficient. Undertake the joining of large organizations.
And the overall operation of the futures market is stable, with an open foundation.
China Securities Regulatory Commission spokesperson Gao Li said that expanding the scope of investment by qualified foreign investors is an important measure to further expand the opening up of the domestic securities and futures market. It will provide foreign investors with more hedging products and allocation tools, which will help attract more investors. Overseas funds increase the international influence of the domestic capital market.
Futures companies usher in long-term positive
The market responded enthusiastically to this opening policy.
Fang Dongming, head of UBS's China Global Financial Markets Department and QFII leader, said in an interview with reporters that the opening policy is strong this time, and all commodity futures options will be opened up, giving qualified foreign institutional investors more opportunities for investment, allocation, and trading. Enriched investment strategies to facilitate overseas qualified institutional investors to carry out investment and risk management businesses in China.
He said that the overall trading rules are expected to be similar to those of domestic traders.
Foreign investors mainly focus on financial investment and cash delivery.
Some people in the industry believe that from the perspective of risk management, most of the qualified foreign investors are not entity companies. If they are hedging commodity futures, there will be issues such as whether to participate in futures delivery and how to conduct physical delivery.
It is reported that the relevant details are yet to be further clarified by the futures exchange.
Cao Yanghui, deputy director of the Nanhua Futures Research Institute, predicts that the incremental impact on the derivatives market in the short term will be relatively limited, but in the long term, it will be conducive to attracting more overseas hedging funds and allocation of funds into the market.
It will also be a long-term positive for futures companies.
This is reflected in the first is the expansion of funds in the futures market, and the second is the increase in customer acquisition channels for futures companies.
Of course, the entry of foreign-funded futures companies into the competition puts forward higher requirements on the service capabilities of domestic futures companies.
Zhang Yueyi, head of the International Business Department of SDIC Essence Futures, told reporters that leading domestic futures companies are intensively preparing for the corresponding services. We will make arrangements in advance and strive to seize the opportunity in the wave of opening up of the capital market.
Opening to the outside world is in good shape
Needless to say, the current development of China's capital market does not match China's total economic output, which ranks second in the world.
For the futures market, an important proposition is to increase pricing power.
Liu Feng, chief economist of Galaxy Securities, said that increasing the pricing power of China's futures market requires the futures market to move out of closure and move towards internationalization. The pace can be faster.
In today's world, almost every commodity is facing a globalized market without borders.
This objectively requires that the influential commodity futures market must implement global trading, and its buyers and sellers must be investors from all parts of the world, otherwise the determined futures prices will not accurately reflect the actual supply and demand relationship of bulk commodities.
The landlord Ming stated that pricing power is related to price influence and liquidity.
The higher the liquidity of the market, the more benchmarking the price will be.
At the same time, good liquidity also helps the market find prices.
Therefore, the introduction of overseas running water is of great significance for enhancing the influence of China's futures market and better serving the real economy.
At present, the opening up of China's futures market shows a good momentum of "three arrows" of varieties, institutions, and investors.
There are 7 international products in the futures market: crude oil futures, rubber 20 futures, low-sulfur fuel oil futures, iron ore futures, PTA futures, international copper futures, palm oil futures.
These international investment targets can be invested by investors overseas.
Now that qualified foreign investors are allowed to enter the Chinese futures market, the internationalization of the futures market has taken another far-reaching step.
At the same time, the policy of expanding the opening up of the futures service industry has been implemented.
From January 1, 2020, the restrictions on the foreign shareholding ratio of futures companies will be lifted.
This time QFII and RQFII enter the futures market, and a large part of the increase will be foreign brokerage futures companies, forming a synergistic effect with the opening of the market.
In the interview, foreign institutions also expressed a strong interest in participating in Treasury bond futures.
Data show that as of the end of September 2021, foreign institutions held 3.84 trillion yuan in bonds on the interbank market.
In terms of bond types, the main custody bond of overseas institutions is treasury bonds, with a custody volume of 2.28 trillion yuan, accounting for 59.3% of the total.
In the future, with the opening up of the bond market, the scale of foreign investors' holding of China's bonds will continue to increase, and the demand for their direct participation in interest rate derivatives such as treasury bond futures will become even more urgent.
According to industry insiders, allowing foreign institutions to participate in China’s treasury bond futures market can effectively meet their interest rate risk management needs and increase the willingness and motivation of foreign institutions to hold debt. Foreign institutions do not need to buy and sell spot to manage interest rate risk exposure, which can reduce their exposure to the bond market. The above operations, reducing the frequent cross-border capital in and out, are of positive significance for stabilizing the investment of overseas institutions and promoting the stable development of the bond market.
Of course, many people in the industry also believe that in addition to QFII and RQFII, they can study, explore and learn from specific types of commodity futures and other opening-up paths, provide overseas institutions with standardized interest rate risk management tools, and optimize the channels for foreign investors to participate in the treasury bond futures market. And mechanism.
"The opening of China's capital market is three-dimensional, and the degree of opening is widely concerned and welcomed by overseas financial institutions and investors." Fang Dongming told reporters that for UBS, it has been strategically increasing its investment and cultivating the Chinese market.
And some of the sovereign funds and pension funds that used to participate in the investment of China through UBS have also opened their own accounts and established QFII and RQFII, and carried out the same business as domestic investors.
"The Chinese market is a competition that no one can ignore. With the growth of Chinese national wealth, the demand for Chinese investors to invest overseas is also increasing. This two-way capital market opening is an important part of the international political and economic landscape. Ballast stone." The landlord Ming said.
Reporter Zhu Huichun