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In perspective (part III): Tackling China’s capital markets

Release date: 24 Apr 2019 | Eurex Exchange, Eurex Clearing

In perspective (part III): Tackling China’s capital markets

The third part of this series of articles puts China and the development of its capital market in perspective. The development itself is not new – new is the speed in which it has been happening over the last years. The changes we see are impressive.

The latest positive example of the ongoing German-Chinese financial dialogue is the result of the recent discussions between BaFin and the Chinese Securities and Exchange Commission CSRC (China Securities Regulatory Commission).

Just recently, the global index provider MSCI announced that it is increasing the weighting of 235 of China’s large-cap A-shares in its indexes. A further addition of more mid-sized Chinese companies will lift the weighting to more than 3 percent by May 2020. MSCI’s step to integrate China’s domestic stock markets with international capital is a move that could see an estimated USD 125 billion flowing into the country’s equities this year. The hope is that this, along with Bloomberg’s decision to include Chinese bonds in its indexes by April 2019, will direct even more interest to this corner of the global financial system. While foreign ownership of China’s government bonds has grown quite dramatically in five years (from 2 to 8 percent) foreign equity ownership has ticked up only modestly to just above 2 percent.

All this supports Eurex’s Asia activities. As wealth continues to grow, Europe should remain an attractive investment target for Asian investors – and these investments flow through Eurex’s trading systems.

A gateway between Asia and Europe

Deutsche Börse and Eurex anticipated the growing presence and the important future role in the global financial markets that the Asia-Pacific region now plays at a very early stage.

However, we do not consider ourselves an Asian player. Eurex offers comprehensive services to the Asian markets – trading and clearing, technology and risk management from one of the world’s leading derivatives trading and clearing organizations. Currently, more than 40 Eurex participants and trading locations across the Asian-Pacific region contribute to our global liquidity network and facilitate access for Asian investors.

We act as gateway – both for Asian investors who want to access the European markets and for European investors who want to access the Asian markets. We fulfill this gateway function across all layers of Deutsche Börse Group’s value chain. Our expansion strategy is based on long-term and mutually beneficial partnerships with Asian infrastructure providers, regulators and market participants. Past initiatives and projects in the pipeline demonstrate the importance of the Asian markets for the Group.

An example: To support increasing demand by Eurex clients to trade on a global marketplace, we offer extended trading hours for select liquid futures on Eurex Exchange. This enables market participants to extend their business opportunities in the Asian time zones. Since their launch in December 2018, more than 2 million contracts have already been traded.