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Derivative Houses To Jump Into Chinese 'A' Share Market

Prominent derivative houses in Asia, including Credit Lyonnais, Deutsche Bank, HSBC and Merrill Lynch, are looking to join the list of firms entering the Chinese 'A' share equity market which recently opened to foreign investors. The market kick-started with Citigroup, Morgan Stanley, Nomura Securities and UBS (DW, 6/15) as well as Goldman Sachs (DW, 7/14) receiving the first batch of licenses. "The initial response has been phenomenal--we have received a lot of interest from a wide range of investors," said Justin Kennedy, managing director in Asia-Pacific equity derivatives at Citigroup in Hong Kong.

"We're now in the process of applying," said James Rodríguez de Castro, managing director of global equity-linked products at Merrill Lynch in Hong Kong. He expects the firm to start offering the products in the coming months. Nicholas Cohen-Addad, head of equity derivatives at Credit Lyonnais in Hong Kong, said "We'll definitely be applying next year." It is focusing for now on its integration with Crédit Agricole Indosuez. "It depends on the speed of the merger, but we should have approval before the second quarter," added Cohen-Addad.

Not every derivatives house, however, plans to apply for a license. Société Générale is not pursuing an application in the near future, said Laura Schalk, spokeswoman. Market officials said hesitation to commit capital onshore for the minimum period of one-year may be keeping some firms out of the market. In addition, firms want to see how the market develops before diverting resources.

Prakash Krishnan, spokesman at Deutsche Bank, confirmed that the German bank has applied for a license but declined further comment. Josephine Lee, spokeswoman at CSFB, declined comment.


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