HKEx aims to expand mini contracts to more metals and coal

Hong Kong Exchanges and Clearing Ltd (HKEx) plans to expand the range of its three "mini" contracts to include more base metals as well as coal, an executive said on Thursday.

HKEx on Tuesday gave a launch date of Dec. 1 for contracts in copper, aluminium and zinc with smaller lot sizes than those on the London Metal Exchange (LME), which HKEx bought in 2012.

"Eventually we want to have all of the LME metals (as mini contracts)," Bonnie Liu, senior vice president of Asia Commodities, told Reuters on the sidelines of a seminar sponsored by news agency Bloomberg.

"We will definitely have coal next year," she added.

Coal was originally due to be among the first contracts listed, but it was delayed so HKEx could focus on one sector for the launch, Liu said.

There is huge scope for growth of the contracts, which have a lot size of 5 tonnes instead of 25 tonnes for LME benchmark futures, among smaller Chinese investors, she said.

"There is big potential for increasing Chinese pricing power." The new contracts are cash settled in offshore renminbi, not physically settled like LME contracts.

They will target Chinese retail investors, mostly wealthy individuals, who account for about 70 percent of current trading on Chinese exchanges, she said in a speech.

"We want to inject new liquidity in the metals markets," Liu said.

HKEx's extensive network, including 34 members in mainland China, should make this launch more successful than a failed attempt by the Singapore exchange to offer LME mini contracts, she said.

The contracts will be settled using the official LME prices on the third Monday of the month.