MSCI China A50 Connect (USD) Index Futures

The MSCI China A50 Connect Index is an index that includes large and mid-cap China A shares listed on the Shanghai and Shenzhen exchanges. Launched in September 2021, the index recently celebrated its first-year anniversary in September 2022.

The MSCI China A 50 Connect Index seeks to represent the performance of the top 50 large-cap China A shares, it also provides a reflection of the Chinese economy.

Built from the flagship MSCI China A Index (the parent index), it utilizes all MSCI’s investment requirements (see MSCI Global Investable Market Indexes (PDF, 5.8 MB) (opens in a new tab) methodology) and, through the Stock Connect program,¹ may be used to serve as a proxy for the full market opportunity including China’s new economy.

Based on the MSCI’s introduction to the product, the product is designed to contribute as a broad-based sector-balanced index, and some examples of the momentum generated by the contract include the HKEX futures contract and the ETF launches in Mainland China.

Its alternative, the MSCI China A50 Connect (USD) Index Futures also functions based on the same underlying China A index but with the mechanism of a futures contract. This futures contract was launched on October 18, 2021, and introduced a new risk management tool to meet growing investor demand and interest in A50 shares.
 

What Is Stock Connect?

Since its launch in 2014, Stock Connect has become one of the main methods for international investors to trade in the Chinese market through the Hong Kong exchange, and it has also served as a way for Hong Kong Markets to trade with Mainland China.

 

MSCI China A50 Connect (USD) Index Futures

The MSCI China A50 Connect (USD) Index Futures has the following specifications:

The contract size for MSCI China A50 Connect Index Futures has a minimum price fluctuation of 0.20 index points with a contract multiplier of USD 25 per index point. The trading currency is USD while the underlying index currency is CNH.

The last trading day is the third Friday of the contract month. (Postponed accordingly if it is a legal holiday in China or a separate adjustment depending on when the preceding trading day is, which is also a business day in Mainland China.)  

Contract months are the spot month, the next calendar month, and the following 4 quarterly months.

MSCI China A50 Connect (USD) Index Futures symbol: MCA

 

Internationalisation of the A-share market

With the support of regulators in Hong Kong, China, and a US-based Commodity Futures Trading Commission certification, the A-share market is quickly developing and refining its suite of products to international investors.

Furthermore, the product offers a high level of correlation to the CSI 300 Index and exposure to China’s real economy. While the product is only a year old, the potential of the product for more participants and its placement at HKEX remains a channel for international investors to access the mainland China equities market.

Based on an update written in October 2022, since the launch of the futures product, it had achieved US $1.6 billion in open interest in the first full month of trading.    

 

Market News and Statistics

Figure 1: Source: MSCI China A50 Connect (USD) Index Futures

 

The above attached is the yearly price record of the MSCI China A50 Connect (USD) Index Futures, which can also be found on MSCI’S official website or the Hong Kong Exchange.

Currently, SGX offers FTSE China A50s, while HKEX offers the MSCI China A50 Connect (USD) Index Futures. These two products are often compared to one another. Based on TheStandard, “Hong Kong’s entry is a threat to SGX in a key business for the Southeast Asian bourse , where it had held a monopoly since 2006. SGX’s existing product accounts for more than half of its equity derivatives trading volume…”.  

On the other hand, SGX’s deep ecosystem in China’s A50 index futures continues to remain strong. With a more liquid market from years of establishment, it is expected that SGX will continue to keep its competitive edge while the A50 market continues to expand.  

For the MSCI China A 50 Connect Index Futures, traders can continue to look forward to trading it as a complement with HKEX’s China-related products and services, including Stock Connect, Structured Products, ETFs, and derivatives. These avenues consolidate China’s exposure in one venue and more information regarding products offered by HKEX can also be found here.

Overall, the golden week, public holidays, and the rebound of virus cases have all contributed to the fall in China stocks in October. From CNN, it was reported that “holiday spending during China’s Golden Week has plunged to its lowest level in seven years…”. However, that has since changed and the MSCI China A 50 Connect Index has been volatile while optimism grew.

 

Start Trading With Orient Futures Singapore  

Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.

Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and Intercontinental Exchange Singapore (ICE SG).

We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.