Saxo extends China reach via the HK CFDs

Saxo Capital Markets – which is a subsidiary of Denmark's Saxo Bank – is now offering online investors a broader access to China equities via its contracts for difference (CFD) products based on the Hong Kong's benchmark Hang Seng Composite Index.

The new CFDs will enable SaxoTrader users from around the globe to trade all 201 Hang Seng component stocks as well as those represented by the China Enterprises Index (HSCEI), which accounts for 42 China-based firms listed on the Hong Kong Exchange, including some of the world's largest companies such as PetroChina, China Mobile, CNOOB and Bank of China.

CFD are derivative products traded on margin of typically 10% and enables investors to track share, index or currency price movements.

Essentially, they replicate the performance of an underlying instrument – which can be a share or index – and allow clients to either trade long or short a stock based on the anticipated performance of the instrument.

If for instance, the price of an underlying share were to move 1%, the gain from a CFD would be at least 10 times greater.

CFDs were originally used by institutions to cover their equity or currency exposures and are now increasingly used by retail investors. They account for 30% to 40% of the trading volume on the London Stock Exchange (LSE), and about 20% of trading volume in Australia.

Kevin Ashby, the chairman and CEO (Asia Pacific) of Saxo Capital Markets noted, "Hong Kong has long been the recognised gateway to China. It is a major financial centre with political stability, high levels of liquidity and commonly looked upon as a platform for exposure to some of the fastest growing economies of the world including the resilient markets in China."

"Exposure to the Hong Kong Exchange will enable investors to capitalise on opportunities surrounding major events like the upcoming Beijing Olympics in September and the World Expo in Shanghai in 2010. All indicators point to a very dynamic online trading environment in Asia."

"Hong Kong is set to grow its position as a major player in Asia. We expect investors to increasingly use the local exchange as a route to benefit from a wider diversification to China," said Ashby, who noted that the Hong Kong Exchange has almost doubled its net profit to HK$1.65 billion on the back of a 63% rise in revenue to HK$2.3 billion.

He added that the addition of the HKEx CFDs underscores the Saxo Bank group's primary strategies of strengthening its already extensive product offering of tradable assets and market presence in Asia, which include the Tokyo, Singapore and Australian Stock Exchanges on its SaxoTrader trading platform.

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