Stock Index Futures Can Play An Active Role
August 03, 2016
Mainland stocks gain ground as analysts maintain optimistic long-term outlook
Mainland stocks managed to inch up on Wednesday despite pressure from
falling financial shares and a decline in the ChiNext Index, as
analysts remained optimistic about equities in the long-run.
The benchmark Shanghai Composite Index added 0.24 percent to close at
2,978.46 points, while the Shenzhen Component Index finished the day
0.30 percent higher at 10,281.25 points.
The CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen inched up 0.14 percent to 3,193.51 points.
The ChiNext Index, which tracks the country's NASDAQ-style board for
growth enterprises, slipped 0.23 percent to 2,108.31 points.
A total of 381.9 billion yuan ($57.61 billion) in shares changed hands on the Shanghai and Shenzhen exchanges on Wednesday.
Stocks in most sectors rose on Wednesday, with stocks related to
State-owned enterprises (SOEs) reform leading the winners, and bank,
securities and insurance stocks leading the losers.
The China Financial Futures Exchange is planning to relax
restrictions on stock index futures that sparked a 99 percent plunge in
trading, Bloomberg reported on Wednesday, citing people familiar with
the matter.
Stock index futures can play an active role in reducing
volatility and systemic risk in the mainland stock markets, said Yan
Hong, professor at the Shanghai Advanced Institute of Finance at
Shanghai Jiao Tong University. Yan noted that investors can use index
futures to hedge bets on stocks.
Yan also said that the stock index futures can help
attract more professional institutional investors, who usually apply
multiple investment strategies, which is helpful in price discovery.
Analyst from Jinbailin Investment Consulting said stocks
came under pressure on Monday from a sell-off in overpriced small and
mid caps. However, they also said that SOEs reform will bolster stocks
and make it impossible for the benchmark index to collapse as long as
the government maintains its push for reform.