China to open derivatives bourse to foreigners

By Russell Blinch and Alfred Cang

SHANGHAI (Reuters) - China is likely to open the gates of its new derivatives exchange to foreigners next year to attract trading volume and allow investors to hedge their mainland stock investments.

Liu Zhongyuan, vice president of Topwin Futures Co. in Shanghai, said in an interview for the Reuters China Century Summit that the exchange is expected to allow foreign access through China's qualified foreign institutional investor, or QFII, program.

China's regulator is also likely to give the green light to QFIIs to enter into the country's commodities futures markets next year, he said.

"There will be a breakthrough in allowing QFIIs into the Chinese futures markets next year," Liu told Reuters in an interview at his Shanghai office on Thursday.

The Shanghai Financial Derivatives Exchange, to be formally launched on Friday, will offer futures based on an index of the 300 largest companies traded on the Shanghai and Shenzhen exchanges by year-end, said Liu, who helped set up the bourse.

Currently, investors holding QFII quotas are not allowed to trade in China's futures markets. But they can trade stocks and bonds.

Mock trading of stock index futures will next week, although actual trade is not expected until later this year.

China currently has two stock exchanges in Shanghai and Shenzhen and three futures exchanges for commodities.  Continued...