Investors worried about impact from futures

By Wang Jiamei Source:Global Times Published: 2015-7-16 23:08:01

Market stability not under threat: experts

A child plays at a brokerage in Haikou, South China's Hainan Province. Photo: CFP

Potential downward pressure on the A-share market from settlement on Friday of index futures for July has become a key focus of attention for investors, but it is unlikely that overall market stability will be affected, experts said Thursday.

The mainland markets saw a slight rebound on Thursday, with about 130 stocks surging by the 10 percent daily limit.

The benchmark Shanghai Composite Index rose 0.46 percent or 17.48 points to close at 3,823.18 points Thursday, while the Shenzhen Component Index rose by 1.86 percent or 225.19 points to 12,357.61 points.

The CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen gained 0.77 percent or 30.60 points to end at 3,997.36 points, while ChiNext, the country's NASDAQ-style board for high-tech and emerging start-ups, jumped 1.43 percent or 37.05 points to 2,627.08 points.

While analysts generally said the markets have stabilized as a result of recent government support measures, investors are concerned about potential downward pressure from Friday's settlement of index futures for July delivery.

Futures contracts are agreements to buy or sell at the present value on an agreed date, and stocks are usually volatile when the settlement of futures contracts is due.

On Friday, it will be critical for State-backed institutional investors to prop up the market, Reuters reported Thursday, citing a trader at a Chinese bank.

The July contract for CSI 500 Index futures, which track the CSI 500 Index of small- and mid-cap companies, jumped 5.32 percent to 7,531.8 points on Thursday, but is still priced at a discount to the spot market level. And as the contract matures on Friday afternoon, futures investors may try to drive down the index level to avoid losses.

But most analysts said the futures will have a limited impact on the overall market, and won't affect stability.

"Even if the stock markets fall on Friday, it will be a normal market movement and won't affect investor confidence," a Shanghai-based analyst who wished to remain anonymous told the Global Times Thursday.

Meanwhile, the July contract for CSI 300 Index futures, another major futures contract that also matures on Friday, increased 4.76 percent to 4,008.0 points, which is currently at a premium to the spot level.

China's four major State-backed securities newspapers - the China Securities Journal, the Shanghai Securities News, the Securities Times and the Securities Daily - published articles on Thursday saying that the government's determination to stabilize the markets hasn't changed, but it doesn't mean there will be a new stock surge.

At the same time, as short selling of index futures is considered one of the reasons behind the recent market plunge, which erased trillions in market value, China's securities regulator has been working with the police since last week on an investigation into short-selling practices.

The Ministry of Public Security is currently investigating some Shanghai-based trading companies involved in "malicious" short-selling of A shares, the China Times reported Thursday, citing an anonymous source.

"Short selling is legal, but the tricky part is how to define whether it is 'malicious' or not," Wu Hong, director of the School of Economic Laws at the East China University of Political Science and Law, told the Global Times Thursday. "So far there are no articles of law regarding 'malicious' short-selling. By 'malicious,' maybe they mean market manipulation."

The authorities are also targeting unregulated margin finance. Hundsun Technologies Inc announced on Thursday in a filing with the Shanghai Stock Exchange that it will stop opening new accounts on its fund-matching platform, and will also shut down all accounts with zero balances and prevent new capital from flowing into existing accounts.

The move came just after a regulatory enforcement team visited Hundsun Technologies Monday to investigate its platform for providing unregulated margin financing for stock purchases.


Posted in: Economy

blog comments powered by Disqus