South Korea is pushing back the launch of yuan-won futures contracts to early October from an initial June target, having been delayed by the implementation of a widening in the trading band for stocks and futures, the head of Korea Exchange said. As part of efforts to boost activity in Seoul's yuan-won market launched on December 1 last year, government and exchange sources had previously said they aimed for a possible June launch of the futures contracts.
"We are launching yuan-won futures contracts as a hedging tool against currency risks as direct yuan-won trades will rise sharply and more trades will be made in yuan in the future," Korea Exchange Chairman and Chief Executive Choi Kyung-soo told Reuters in an interview at his office in downtown Seoul.Choi added that Korea Exchange is looking to attract yuan-denominated bonds to the exchange to meet demand from South Korean investors seeking higher returns and Chinese firms looking to raise money in more stable markets.
Last month China suspended IPOs as part of its efforts to prevent a collapse in its stock markets. The suspension left companies on the verge of listing looking for new ways to raise funds needed to grow their businesses.
"There have been increasing 'knocks' from Chinese firms since China suspended IPOs," Choi said when asked about any spillover effect from the latest measures taken by Chinese government to protect its stock markets.
Choi, a former CEO of Hyundai Securities who was appointed in October 2013, said the exchange's daily price band - which was doubled to 30 percent in either direction on June 15 - should eventually be scrapped, as such controls are not needed in a developed market. He said the exchange is not considering widening it further. Choi said he expects the exchange's planned IPO to be launched at the end of 2016 or in the first half of 2017, if parliament gives its approval.
The proceeds from the IPO will be used to fund acquisitions of foreign exchanges, or joint ventures with exchanges which do not have derivatives markets or have relatively less developed derivatives markets. Currently, the exchange is owned nearly 40 brokerages, all of whom have minority stakes.