NEWS
Big increase in overseas investor participation in HKEx's derivatives market
20 November 2012
Category:
News, Asia, Global, Hong Kong
By Asia Asset Management
Overseas investors' participation in HKEx's futures and options market reached the highest level since 2005, according to Hong Kong Exchanges and Clearing Limited’s (HKEx) Derivatives Market Transaction Survey 2011/12. The survey found that exchange participants' (EP) principal trading and investor trading continued to contribute equally to HKEx's derivatives market turnover from July 2011 to June 2012 and that overseas investors' contribution marginally surpassed that of local investors for the first time.
In 2011/12, the total turnover for the futures and options under study was 135 million contracts (referred to as the total market turnover in this survey), up 6% from 127 million contracts in 2010/11. Stock options remained the dominant product by turnover, contributing 50% of the total market turnover (as measured by contract volume).
Key findings of the 2011/12 survey
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EP principal trading (comprising market maker trading and EP proprietary trading) contributed 50% of total market turnover (compared with 51% in 2010/11), 69% of stock options turnover (the same as in 2010/11) and 30% of turnover in other futures and options (29% in 2010/11).
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Overseas investors contributed 26% of total market turnover (up from 23% in 2010/11), and local investors contributed 24% (down from 26% in 2010/11).
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Retail investors contributed 21% of total market turnover (down from 23% in 2010/11), mostly from local retail investors (17 per cent). Institutional investors contributed 29% in 2011/12 (up from 27% in 2010/11), most of this (22%) being from overseas institutional investors.
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Major products:
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For Hang Seng Index (HSI) futures, overseas institutional investors were the major contributors (44% of the product’s turnover), while EP principal trading and local retail investor trading were also significant (22% for each).
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For H-shares Index (HHI) futures, overseas institutional investors were the major contributors (56%). EP principal trading was also significant (26%).
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For Mini-HSI futures, the major contributor was local retail investors (47%), with a significant contribution from EP principal trading (25%).
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For Mini-HHI futures, EP principal trading and local retail investor trading were the most significant (42% and 40% respectively).
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For HSI options, EP principal trading was dominant (51%, 46% from market making), while local investors’ contribution was also significant (28%, 19% from individuals).
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For HHI options, the major contributors were EP principal trading (47%, 33% from market making) and overseas institutional investors (31%).
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For stock options, EP principal trading was dominant (69%, 67% from market making), while local investor trading was also significant (19%, 14% from individuals).
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Among overseas investors, UK investors were the largest contributor to overseas investor trading (28% in 2011/12, up from 25% in 2010/11). They were followed by Continental European investors (24%, up from 16% in 2010/11) and US investors (16%, down from 23% in 2010/11). Almost all trading from these origins came from institutional investors (over 95%). The aggregate contribution from investors in Asia outside Hong Kong was 28% of overseas investor trading, mainly from Mainland China and Singapore (12% and 11% respectively).
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Retail online trading contributed 63% of total retail investor trading (up from 54% in 2010/11) and 13% of total market turnover (compared with 12% in 2010/11).
The survey has been conducted annually since 1994. The latest survey covers HSI futures, HSI options, Mini-HSI futures, HHI futures, HHI options, Mini-HHI futures and stock options. These products together accounted for 99% of the total turnover of the HKEx derivatives market during the study period of the 2011/12 survey. The survey had an overall response rate of 91% and the respondents contributed 98% of the total turnover in products under study during the study period.
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