It’s difficult to overstate the importance of China’s rise – the country’s transition from backwater to global powerhouse is changing the calculation for every sector, industry, investor… you name it. We’ve been watching the slow but steady expansion of managed futures into China for a while now, and anticipating the CME’s decision to roll out deliverable yuan futures, too (those are slated to start trading in less than a month, by the way).
And now another step on the path to Chinese managed futures is in place: approval for a select group of banks to begin trading futures contracts in China. Reuters reports:
China has approved five foreign banks as the first batch of international investors to trade the country’s stock-index futures, people familiar with the situation said Friday, in a widely anticipated move that for the first time offers a tool for such investors to hedge against share price fluctuations.
The five banks, which are members of China’s so-called Qualified Foreign Institutional Investors program, include Morgan Stanley, UBS AG, and BNP Paribas, said the people, who declined to be named.
The China Financial Futures Exchange, which hosts and oversees the trading of stock-index futures, confirmed that it approved the first batch of QFIIs to trade stock-index futures but declined to disclose how many or their names.
Launched in 2002, the QFII program is one of the few ways foreign investors can trade China’s domestically listed, yuan-denominated A shares as well as bonds. Licensed QFIIs must apply to the foreign-exchange regulator for investment quotas.
Despite China’s many hurdles and hoops to foreign investment, the western appetite for a slice of the country’s growing pie remains strong. With Winton already breaking the ice on the managed futures front, and now the QFII program banks getting the green light to start trading Chinese stock index futures, the stage is set for a boom in Chinese managed futures.
Will this expansion define the future of our industry? We’re not ones to discount the possibility, but there’s still plenty of reason to be cautious. There’s huge potential, but also a fair share of risk, and a very real chance that the universally-accepted wisdom of investing in China may disappoint. Remember when Japan’s economy was going to overtake the US by 2000? Sometimes the obvious story doesn’t wind up being the correct one.
But in the meantime, the trickle of managed futures opportunity in China is picking up pace.
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.