China Securities Journal: Commodity Futures ETF Beneficial to the Improvement of Investor Structure

Updated on Nov 17,2014

By Guan Ping

On November 15, the “Setting Sail in Futures Industry and Having Ways to Invest – 2014 IMCI (Industrial Metal Commodity Index) Futures and Commodity Futures ETF Forum”, hosted by Haitong Futures, was held in Shanghai. The Forum has received great support from the Shanghai Futures Exchange (SHFE) and China Futures Margin Monitoring Center.

The Forum invited over 120 nonferrous metals industrial customers, professional investment organizations, and individuals. Market insiders pointed out that the IMCI futures is not only a kind of product innovation, but also an effective tool to enhance industry’s service capacity and make deep and perfect the existing products. On the one hand, the launching of IMCI futures has helped to form an arbitrage market between index futures and nonferrous metals futures products, thus promoting the further increase of products’ liquidity and the depth and refining of existing nonferrous metals products; on the other hand, some downstream consuming enterprises in the nonferrous metals industry are not enthusiastic in participating futures hedging mainly due to the high hedging cost. But the IMCI futures contracts, with their low-cost features such as the moderate scale and the capacity of avoiding graded margin adding, can help downstream enterprises in the nonferrous metals industry, especially micro and small enterprises, to engage in risk management, thus enhancing the industry service capacity and coverage of the futures market.

Domestic and overseas experts attending the forum believed that the commodity futures ETF is a relative mature product that has been rapidly developing overseas, and using the existing products in China’s commodity futures market to develop ETF product has the following significance. First, it can introduce institutional investors to participate in the investment in the commodity futures market, thus helping to improve investor structure; second, investors can participate in bulk commodity investment through ETF’s professional management, thus expanding the development space of the fund industry and facilitating the construction of the multi-level capital market system; third, it can meet investors’ diversified asset allocation demand, thus effectively dispersing investment risks.