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H.K., Shanghai agree to develop energy derivatives market.

HONG KONG, April 11 Kyodo

Hong Kong Exchanges and Clearing Ltd. (HKEx), the holding company of the territory's stock and futures exchanges, and mainland China's Shanghai Futures Exchange (SHFE) signed a memorandum of understanding Friday to explore the possibility of developing an Asian energy derivatives market.

The two exchanges said they will set up a joint venture based on international market standards to offer a series of benchmark energy derivative products designed to serve both Chinese and international investors under a single market.

A crude oil futures contract is likely the first product to be introduced, they said.

Noting that crude oil is important to the further economic development of mainland China and the rest of Asia, HKEx and SHFE said the region apparently needs a market for the transferring and managing of the price risks associated with the product.

''If a sufficiently attractive business case can be developed, approval for the market and its products will be sought from the two markets' respective governmental and regulatory authorities,'' they said in a statement.

HKEx and SHFE said they will now begin discussion with market participants on the optimal terms for the proposed energy derivatives market and potential market demand, particularly the interests of Asian investors.

A joint working group with representatives from both sides will be set up to develop a business model and mark out the proposed joint venture structure, they noted.

''This is the first time that a mainland (Chinese) futures exchange explores substantive cooperation relationship with exchanges outside mainland (China),'' said Jiang Yang, chief executive officer of SHFE.

Jiang said the collaboration with HKEx can help SHFE speed up its step in the process of internationalization.

HKEx Chairman Charles Lee said the cooperation marks another important step in the strategic plan of HKEx to become the Asian hub of the global financial markets.
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Publication:Asian Economic News
Geographic Code:9CHIN
Date:Apr 14, 2003
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