HONG Kong Exchanges & Clearing Ltd. (HKEX) rallied yesterday after receiving a long-awaited clearance to offer A share index futures contracts, giving global investors a new tool to hedge China risk.

The firm, operator of Hong Kong’s stock exchange, Friday signed an agreement with MSCI Inc. to launch futures contract based on the MSCI China A 50 Connect Index, tracking performance of 50 Shanghai and Shenzhen stocks that are traded via a link between the mainland and Hong Kong. The futures will start trading Oct. 18, according to a statement.

After more than a two year wait, HKEX was granted approval to issue futures by Hong Kong’s Securities and Futures Commission (SFC) and the mainland securities regulator.

The new product is expected to generate fresh revenue for the exchange operator.

The product will be a “game changer” for the mainland’s financial market, HKEX chief executive officer Nicolas Aguzin said at a press briefing last week. He declined to provide an estimate on how much revenue the new product will generate for the firm.

It will also bring China closer to an expanded inclusion in major global indexes. MSCI has listed a lack of access to hedging and derivatives as one pressing issue for the market.

Citigroup analysts said in a note that the product could add about HK$1 billion (US$128 million) in revenue for HKEX by 2024. (SD-Agencies)