XN000022-1994-11-30 — Page 25

WEDNESDAY, NOVEMBER 30, 1994

SOME HAVE ALLEGED THAT THE GOVERNMENT HAS BEEN "TOO HASTY AND POSITIVE" IN PROMOTING THE PRODUCT. I HAVE DIFFICULTIES WITH THE CRITICISM MR PRESIDENT. THE GOVERNMENT'S POLICY IS TO SUPPORT MARKET DEVELOPMENT AND PRODUCT INNOVATION ON BOTH EXCHANGES. WE WILL BE NO LESS ENTHUSIASTIC ABOUT STOCK OPTIONS ALTHOUGH THERE IS NO NECESSARY REASON FOR THEM TO BE INTRODUCED AT THE SAME TIME. WE WILL CONTINUE TO ASSIST THE REGULATOR IN EXERCISING HIS REGULATORY FUNCTIONS AS FAR AS NEW FINANCIAL INSTRUMENTS ARE CONCERNED. IN THIS PARTICULAR CASE, THE INVOLVEMENT OF THE GOVERNMENT HAS BEEN CONFINED ΤΟ MAKING THE NECESSARY CHANGES TO SCHEDULE 1 OF THE COMMODITIES TRADING ORDINANCE TO FACILITATE BETTER REGULATION OF STOCK FUTURES. THERE IS THEREFORE NO QUESTION THAT THE GOVERNMENT IS INTERVENING IN THE LAUNCHING OR PROMOTION OF THE PRODUCT, RATHER WE ARE ENCOURAGING PRODUCT DEVELOPMENT IN GENERAL.

IT HAS BEEN SUGGESTED THAT THE WORRIES OF THE FUTURES EXCHANGE ABOUT COMPETITION FROM OTHER MARKETS WERE UNFOUNDED SINCE SUCH MARKETS SIMPLY CANNOT TRADE A FUTURES CONTRACT ON HONG KONG STOCKS WITHOUT THE CO-OPERATION OF THE STOCK EXCHANGE IN HONG KONG. THOSE SUPPORTING THIS ARGUMENT, I MUST SAY, HAVE GROSSLY UNDER-ESTIMATED THE COMPETITIVENESS OF EXCHANGES ELSEWHERE.

THERE ARE PLENTY OF EXAMPLES SHOWING THAT THE TRADING OF DERIVATIVES CAN BE CONDUCTED WITHOUT THE CO-OPERATION OF THE HOME MARKET FOR THE UNDERLYING SECURITIES. SIMEX IN SINGAPORE HAS ALREADY PROVEN ITS WILLINGNESS AND ABILITY SUCCESSFULLY TO TRADE PRODUCTS SUCH AS FUTURES AND OPTIONS ON NIKKEI STOCK AVERAGE, FUTURES ON JAPANESE GOVERNMENT BONDS, ETC. DESPITE THE ACTIVE AND VOCAL OPPOSITION OF THE TOKYO STOCK EXCHANGE. SYDNEY HAS ALSO ANNOUNCED, PUBLICLY AND IN WRITING, ITS INTENTION TO TRADE FUTURES ON INDIVIDUAL INTERNATIONAL STOCKS. OTHER MARKETS ARE ALSO KNOWN TO BE DEVELOPING STOCK FUTURES AND IT IS ONLY A MATTER OF TIME BEFORE THEY ARE TRADED AROUND THE WORLD. HONG KONG SHOULD NOT ALLOW ITSELF TO FALL BEHIND.

IT HAS FURTHER BEEN SUGGESTED THAT THE INTRODUCTION OF STOCK FUTURES IN EFFECT ENCOURAGES INVESTORS TO BECOME MORE SPECULATIVE. SOME HAVE EVEN DESCRIBED THE PRODUCT AS A "GAMBLING INSTRUMENT". SUCH KIND OF LABELLING IS NOT CONDUCIVE TO A RATIONAL DISCUSSION ISSUE.

ON THE

AS WITH ALL OTHER INVESTMENT INSTRUMENTS, INCLUDING SECURITIES THEMSELVES, STOCK FUTURES CAN HAVE A SPECULATIVE ANGLE. BUT THE MERE FACT THAT SOME INVESTORS MAY USE AN INSTRUMENT FOR THE PURPOSE OF SPECULATION SHOULD NOT BE A REASON FOR NOT DEVELOPING OUR MARKET. OTHERWISE, WE WOULD HAVE TO BAN INVESTMENT PRODUCTS FROM TRADING IN HONG KONG ALTOGETHER, WHICH IS PLAINLY ABSURD.

THE HONOURABLE CHIM PUI-CHUNG HAS ASKED FOR AN UNDERTAKING FROM THE GOVERNMENT THAT, SHOULD STOCK FUTURES LEAD TO A COLLAPSE OF THE FUTURES MARKET, OTHER SECTORS OF OUR FINANCIAL MARKETS SHOULD NOT ASKED TO BAIL OUT THE FUTURES EXCHANGE.

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