By Tan Lee Hock

China aims to kick off its long-awaited stock index futures market next month, and an exchange official says that a top concern is that the landmark scheme will attract too many investors who spark volatile trade, according to a Reuters report that was published in the Business Times.

Regulators have prepared for possible “emergency situations” during the launch and will try to curb speculators, said Zhu Yuchen, general manager of China Financial Futures Exchange where the stock index futures will be traded.

“We want to see a small and stable start of stock index futures trade, and we don’t expect that too many investors should participate in the programme in the initial phrase,” Mr Zhu told reporters on the sidelines of the National People’s Congress.

“Small is good. If there is a large number of investors queuing to open accounts, to be honest, I will be quite worried,” said Mr Zhu, a Shanghai delegate to the NPC.

China is launching stock index futures to deepen its financial markets with hedging tools and new products while improving liquidity, as it aims to build Shanghai into a global financial centre over the next decade.

Asked if initial trading volume might be too low with too few players, Mr Zhu replied: “I think we’ve got enough investors for now.” He declined to elaborate.

Shang Fulin, China’s top securities regulator, announced last week that the country’s first stock index futures trade - under discussion for more than three years - is expected to begin in mid-April, preceded by a pilot programme for margin trading and short selling of shares.

Mr Zhu, who helped to open the Shanghai-based financial futures bourse in 2006, said that he would not expect the stock index futures market to be a “mass market”.

“I don't think this is something that an ordinary domestic stock investor could play with,” he said. “This is purely for professional investors, and that’s why some barriers are needed.”

To limit the number of investors for the pilot programme, the exchange announced last month that individual investors will be required to have a minimum of 500,000 yuan (S$102,700) to open an account, while initial margins will be set at 15-18 per cent.

Mr Zhu said that these rules were all aimed to maintain the stability of China's capital markets despite the launch of stock index futures, which some analysts said may become a new tool for so-called “hot money” speculators.

“We have made estimates on many possible emergency situations, and we are prepared to deal with the emergency if that happens. After all, stability is the top priority,” said Mr Zhu.

More than 80 per cent of investors who joined a virtual programme of stock index futures trade, launched by the exchange to test its trading system, ended up losing money, local media reported.

“This is just a test but this also reminds us that stock index futures trade is not as simple as buying and selling stocks,” Mr Zhu said.