Wall Street has hacked into China's mainframe and isn't being detected by the government. They have found a new toy in a backdoor to Chinese markets.
December 29, 2014
Hong Kong's off-exchange derivatives market (click here) is thriving as foreign funds prevented from using a landmark Hong Kong-Shanghai trading link by technical and regulatory hurdles look for a back door to gain exposure to China's record-breaking stocks rally.
The development is a blow for Beijing, which has long-feared an influx of anonymous, footloose foreign money could increase volatility in China's already wild stock markets, and comes as regulators globally look to clamp down on opaque off-exchange trading.
Some of the biggest global banks were already able to offer so-called "synthetic" equity products that provide clients with exposure to mainland China stocks, known as "A-shares", using shares purchased through restricted investment quotas.
Because such over-the-counter (OTC) derivatives are traded off-exchange, the identity of the underlying investor, and the size of the market, is often unclear to regulators....
...Several brokers and fund managers told Reuters that the vast majority of trading on Hong Kong-Shanghai Stock Connect is happening away from Beijing's gaze in Hong Kong's OTC market. "Synthetic equity products are the main vehicle for accessing the A-share market at the moment," said Stephane Loiseau, head of cash equities for Asia-Pacific at Societe Generale in Hong Kong....
Hong Kong's off-exchange derivatives market is thriving as foreign
funds prevented from using a landmark Hong Kong-Shanghai trading link by
technical and regulatory hurdles look for a back door to gain exposure
to China's record-breaking stocks rally.
PHOTO: BLOOMBERG
Hong Kong's off-exchange derivatives market (click here) is thriving as foreign funds prevented from using a landmark Hong Kong-Shanghai trading link by technical and regulatory hurdles look for a back door to gain exposure to China's record-breaking stocks rally.
The development is a blow for Beijing, which has long-feared an influx of anonymous, footloose foreign money could increase volatility in China's already wild stock markets, and comes as regulators globally look to clamp down on opaque off-exchange trading.
Some of the biggest global banks were already able to offer so-called "synthetic" equity products that provide clients with exposure to mainland China stocks, known as "A-shares", using shares purchased through restricted investment quotas.
Because such over-the-counter (OTC) derivatives are traded off-exchange, the identity of the underlying investor, and the size of the market, is often unclear to regulators....
...Several brokers and fund managers told Reuters that the vast majority of trading on Hong Kong-Shanghai Stock Connect is happening away from Beijing's gaze in Hong Kong's OTC market. "Synthetic equity products are the main vehicle for accessing the A-share market at the moment," said Stephane Loiseau, head of cash equities for Asia-Pacific at Societe Generale in Hong Kong....
