By Bloomberg News April 16 (Bloomberg) -- China’s stock-index futures rose in their first day of trading as investors bet the nation’s equities may advance later this year as the outlook for the property market improves. The four contracts based on the CSI 300 Index, which tracks the 300 biggest stocks on the Shanghai and Shenzhen stock, all advanced as of 11:21 a.m. local time. The CSI 300 declined 0.7 percent while the Shanghai Composite Index fell 0.8 percent. “Major players are still very cautious about index futures and haven’t entered the market yet,” said Larry Wan, deputy chief investment officer at KBC-Goldstate Fund Management Co., which oversees about $583 million. “Speculators are the major players of that market now and they are taking advantage of higher leverage to make short-term profits.” As of yesterday, 9,137 investors had opened accounts to trade futures on the CSI 300 with 8,944 made up of individuals, according to the China Financial Futures Exchange. That’s a fraction of those for stock trading, where 240,951 of new accounts were opened just last week. The introduction of stock-index futures is part of China’s push to provide more options for investors and ease fluctuations after the Shanghai Composite slumped the most among major global markets this year following an 80 percent rally in 2009. The futures will allow investors to hedge risks from potential asset bubbles and make equities cheaper in the long- term, according to Macquarie Group Ltd., Australia’s largest investment bank. ‘Tame Asset Bubbles’ “It will help tame asset bubbles over time,” Michael Kurtz, head of China research at Macquarie Group, said in an interview in Shanghai. “It will bring down the long-term PE average and hedge downside risks.” The Shanghai Composite trades at a historical price-to- earnings ratio of 35.7 times, compared with the current valuation of 28 times, according to weekly data compiled by Bloomberg. The Hang Seng China Enterprises Index, which comprises mainland companies trading in Hong Kong, is valued at 17.9 times earnings. The contracts, agreements to buy or sell the CSI 300 at a preset value on an agreed date, are designed to allow investors to bet on and profit from both gains and declines in the market. The May contract on the CSI 300 climbed to 3,433.6 at the 11:30 a.m. midday break in Shanghai, while the June rose to 3,472, the September gained to 3,534.2 and the December advanced to 3,576. The base value for the contracts is 3,399. More Influential “Lots of institutional investors have yet to participate and are on the sidelines to watch the new thing,” said Li Jun, a strategist at Central China Securities Holding Co. in Shanghai. “As time goes by, the futures market will become more and more influential and ultimately impact the spot market.” Investors must pay cash deposits equivalent to 15 percent of the contract value for May and June contracts and 18 percent for longer-term contracts. The contract values are points of the CSI 300 multiplied by 300 yuan and the minimum contract price movement is 0.2 point, according to the futures exchange. Chinese stocks extended yearly declines today on concern the government will tighten monetary policy further to curb record lending growth and soaring property prices. It has required banks to set aside a larger proportion of deposits as reserves twice this year. The CSI 300 Index has fallen 5.7 percent in 2010 after doubling last year. Down payments for second homes must be at least 50 percent up from 40 percent, and interest rates can’t be lower than 11 percent of benchmark rates, the State Council, the nation’s cabinet, said in a statement late yesterday. Property stocks, the worst performing group this year, are “very cheap” and may halt their slide as inflation accelerates and expectations build for yuan gains, Michael Liang, chief investment officer at Foundation Asset, which oversees $120 million, said in a Bloomberg Television interview on April 14. Citic Securities Co., the nation’s biggest listed brokerage, said stocks may rebound this year. The Shanghai Composite may rally to as high as 3,400 as first-quarter profit at cyclical stocks, or companies that depend on economic expansion, exceed estimates, Citic said on April 6.

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