CHINA has selected Industrial & Commercial Bank of China Ltd. (ICBC), Ping An Insurance (Group) Co., PetroChina Co. and Kweichow Moutai Co. as the first stocks in mock options trading, Shanghai Securities News reported Friday.

    Investors will also be able to buy and sell options on two exchange-traded funds that track the 50 and 180 biggest yuan-denominated stocks in the Shanghai Stock Exchange, the newspaper reported, citing unidentified brokerages.

    China is developing financial derivatives to help traders hedge against potential losses and to lure foreign investors after the benchmark Shanghai Composite Index slumped 33 percent since the start of 2010.

    The regulators started stock index futures three years ago in Shanghai and resumed bond futures trading in September after banning it for almost two decades.

    “Stock options trading will serve the purpose of hedging for different types of investors in addition to the current index futures,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “It can attract more investors into the financial markets with reduced risks.”

    Both call and put options will be allowed for trading in the trial with the minimum of each contract valued at around 100,000 yuan (US$16,469), according to the Shanghai Securities News report. The transaction fee will be 2 percent, it said.

    Single-stock options are contracts on individual stocks that give buyer the right, but not the obligation, to buy or sell a stock at an agreed-upon price within a certain period or on a pre-specified date.

    The Shanghai Stock Exchange will start the single-stock options trial Dec. 26 and may officially introduce it in April, China Securities Journal reported two weeks ago, citing Xie Wei, deputy general manager at the bourse.

    (SD-Agencies)