Hong Kong Exchanges and Clearing Ltd's introduction of new aluminium, zinc and copper futures contracts is expected to gain popularity in the future as the three mini-metals contracts will be denominated in renminbi. Asian News

New yuan-denominated commodity futures, scheduled to launch on Dec 1, will lift Hong Kong's status as an emerging commodity trading center in Asia to cater to the Chinese mainland's mounting demand.

"This is the beginning of a significant commodity market in Hong Kong. The platform will extend Hong Kong beyond equities, to commodities, fix-income securities and currencies," said Romnesh Lamba, co-head of global markets at Hong Kong Exchanges and Clearing Limited (HKEx), at a pre-launch media workshop on Tuesday.

Beginning next Monday, Hong Kong Futures Exchange Ltd (HKFE) - a wholly-owned subsidiary of HKEx - is to issue three "mini" futures contracts - London aluminum, London copper and London zinc. These yuan-denominated mini contracts, of five tons each, will be settled monthly in cash.

While the London Metal Exchange (LME) is a wholesale commodity market with physical delivery, the Hong Kong market is customized for retail investors, physical users in the Asian time zone, especially in China, as well as overseas traders, Lamba said.

"We've seen extremely good reactions from all those users," said Rebecca Brosnan, head of Asia Commodities at HKEx. Her team has met with more than 3,000 market players on the Chinese mainland and in Hong Kong, London and Singapore in the past several months.

As of Tuesday, 14 traders have signed up for the mini-futures market. Among them, 12 trade for physical delivery. "These traders have been consulted on contract design. They believe in renminbi pricing and Asian time zone trading for commodity futures contracts. They are very committed," Brosnan said.

Simultaneously, 72 of the 179 eligible participants of the HKEx have passed the test and are ready to trade the new futures contracts from day one. Eight of them have LME background, whereas 28 are from the mainland.

"There is a lot of demand for the new products," Brosnan added.

According to the exchange, aluminum, zinc and copper are the three most traded contracts on the LME.

Meanwhile, mainland is the biggest consumer of these metals. The mainland consumes 45 percent of global aluminum production, 44 percent of zinc and 44 percent of copper.

Brosnan predicted that the new contracts will become more and more popular because an increasing number of physical commodity contracts will be priced in renminbi.

"We believe a benchmark price in Asian time zone will be denominated in renminbi because of the significance of mainland's consumption of those metals," she said, adding that a larger yuan pool in Hong Kong would help expedite the development of the market.

emmadai@chinadailyhk.com

(HK Edition 11/26/2014 page8)