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The stock index futures market is caught in “severe winter” by the precipitate policies. China Financial Futures Exchange put forward the strictest control measures to stem over-speculation on Sept. 2, which made it difficult for index arbitrage, high frequency trading and even hedging and significantly hit most quantitative hedge products.
Privately-offered funds focusing on futures trading choose to wait and see
Generally speaking, there are three strategies for quantitative hedge products, including Alpha strategy (market neutral strategy), arbitrage strategy and commodity trading advisor (CTA) strategy. “The arbitrage strategy and CTA strategy are adopted in most of the medium and high frequency trading and transaction can hardly be conducted under this situation.” A person from one privately-offered fund in Shenzhen indicated that “Our product scale is small and the company has hedging transaction code in the Exchange; therefore, the Alpha strategy hasn’t been impacted greatly.”
Most private funds choose wait-and-see attitude. It is reported that they have suspended fundraising or made refund for newly-issued products and other products are under logjam. According to statistics on 50 private funds focusing on futures trading by
, 65 percent of investment consultants prefer trading suspension in the short term to wait and see the policies; while over 50 percent believe that the stock index futures is the major investment opportunity in 2015 and policies for the stock index futures have influenced their investment strategies. Only 3 percent of the surveyed privately-offered funds are totally not impacted by policies.
Statistics also show that 11 percent of the privately-offered funds plan to clear part of their products and return capitals to investors.
Commodity futures and offshore futures products
Faced with sharp changes of market environment, some privately-offered funds respond actively and seek for trading opportunities in other investments. Industrial insiders predict that the capital squeezed out of stock index futures will flow to commodity futures, fix income or offshore futures products. “The investment varieties concerned the most by privately-offered funds are absolutely the active trading varieties in commodity futures”. Statistics from
also shows that for privately-offered funds which have already found or are seeking for opportunities in offshore investment, SGX FTSE China A50 Index fully deserves the most popular offshore stock index futures. Over 95 percent privately-offered funds are seeking for investment opportunity in SGX FTSE China A50 Index; HSI Futures, S&P500 Futures, DJIA futures and Nasdaq futures all attract different attentions.
62 percent privately-offered funds focusing on futures trading have other mature operation strategies and they can adjust capital allocation in time. 38 percent privately-offered funds believe that it takes time to explore and test new strategies for dealing with investment environment changes. Besides domestic commodity futures, 11 percent privately-offered funds focusing on futures trading are managing offshore futures products; over one third privately-offered funds have trading experience in offshore index futures.
However, it’s never easy to invest in commodity futures and offshore futures products, etc. “There is not much investment opportunity in commodity futures this year, while the market capacity of commodity futures is smaller than the stock index futures market. It’s not easy for privately-offered funds organizations with large scale of capital to manage it”, so said market participants.
Ai Yuanyuan also states outright that the trading in offshore futures products is involved with multiple problems including foreign exchange control. There is time gap between customers’ account opening and trading, therefore, the actual increase of the number of accounts opened and the trading volume cannot be figured out now. “Institutional products can only participate in overseas market through QDII with limited quota, and actual operation are available certain time after application.”
