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Shanghai unveils stock index futures

Scott Tong Apr 16, 2010
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Shanghai unveils stock index futures

Scott Tong Apr 16, 2010
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Bill Radke: The Shanghai stock market took an evolutionary step forward today. Marketplace’s Scott Tong tells us Shanghai introduced “stock index futures.”


Scott Tong: Stock index futures are a brand new product category for investors in China. In the past, they could only bet on the market going up. Now they have the other choice.

Arthur Kroeber manages the financial firm Gavekal Dragonomics:

Arthur Kroeber: When everyone decides the stocks are going up, they go up really fast, and without any real correlation to fundamentals, because no one is able to, you know, make a bet on the other side.

Allowing in the other side, the pessimists who think the market will decline can reduce volatility.

Kroeber: That ought to cut the top off of some of these speculative bubbles that you’ve sometimes see in the Chinese stock market.

By the way, this is what Kroeber calls a plain-vanilla derivative. Not one of those exotic products at the center of the financial crisis.

Shanghai’s hope is more financial products will lure more bankers and financial firms — and upgrade the eco-system. The city wants to become what it considers an international financial center by 2020.

In Shanghai, I’m Scott Tong for Marketplace.

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