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JPM: Foreigners Are Becoming More Interested In China’s Futures Market

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EDITOR NOTE: So, why are foreign investors becoming increasingly interested in China’s futures market? Well, it is another derivatives market offered by the world’s second-largest economy. On the other hand, it advances the Petroyuan, or rather, China’s attempt to internationalize its local currency--the goal being to unseat the Petrodollar. The difference between the two--the yuan is partially backed by gold; the dollar...what’s backing that anyway?

Overseas investors are becoming much more interested in China’s futures markets, according to a top executive at the first fully foreign-owned futures brokerage in China.

High liquidity in the country’s futures markets has attracted a large number of foreign-funded companies and institutions, Rochelle Wei, chief executive of J.P. Morgan Futures, told Yicai Global yesterday.

“Despite the impact of the Covid-19 pandemic, a great number of clients have opened accounts with us this year,” she said. 

J.P. Morgan Futures, which is 100 percent owned by US investment bank J.P. Morgan Chase, is uniquely positioned to help international investors navigate the ins and outs of the Chinese futures market, according to Wei.

By accessing the global trading platform of its New York-based parent firm, overseas clients can directly access China's market without needing to open multiple separate accounts.

“The company's trading system can also achieve cross-market transactions for clients, such as buying US soybean futures in the foreign market and at the same time selling soybean oil futures and that of soybean meal on the domestic market,” Wei said.

Commodity Futures

So far, there are five commodities available to overseas investors on China’s derivatives market, namely crude oil, technically specified rubber 20, iron ore, pure terephthalic acid and low-sulphur bunker fuel oil.

The further opening-up of stock index and treasury futures to foreign capital is undoubtedly what foreign investment needs and is most concerned about now, Wei said.

There remains huge potential for growth, she added. There are only around 300,000 transactions per day in the futures market. Treasury futures' deals, which are not yet open to overseas investors, only amount to 100,000 transactions a day, she added.

Getting more access will definitely help control risk, she said, adding that “the demand for risk management will naturally increase as foreign investment gets more involved in China's stock and bond markets.”

J.P. Morgan Chase operates a number of different business entities in China, including its futures unit.

“Our goal is 'being complete' rather than 'being comprehensive', meaning that the essential products and services need to be complete from the clients' perspective,” Mark Leung, chief executive of J.P. Morgan China, previously told Yicai Global.

Originally posted on Yicai

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