Stock Connect set to buoy use of more financial instruments

'Through train' will unleash the potential of puts and synthetic equities, reports Emma Dai in Hong Kong.

The Shanghai-Hong Kong Stock Connect is creating a market for new derivatives that will allow investors to hedge against underlying exposure or simply speculate, according to stock brokers and investment analysts.

"The Stock Connect arrangement looks set to create favorable conditions for derivative products with underlying A-share assets," said Thomas Fang, managing director of equity derivatives sales at UBS AG. "Under the legal framework of the arrangement, we were advised that there is no restriction on the issuance of (over the counter) derivative products," he said. "We are already working on those."