Shanghai Stock Exchange Photo:CFP

The Shanghai Stock Exchange (SSE) on Monday launched two option products that will be linked to an exchange-traded fund (ETF) tracking the 50 biggest stocks on the Science and Technology Innovation Board (STAR) market, in what experts said will enhance investor confidence, increase market vitality and provide more channels for investors to participate in the STAR market.

According to cnr.cn, the SSE launched the two products on Monday after approval by the China Securities Regulatory Commission. This is the first new stock option variety launched amid the registration-based IPO system.

The report cited Rong Ying, director of the quantity investment department of China Asset Management, as saying that the launch of the ETF options will support the long-term and stable development of the STAR market. It also signals that the STAR market is maturing.

According to Rong, the option products will improve the pricing efficiency of the STAR spot market by limiting volatility. They will also offer effective risk management tools. 

Prior to the STAR Market 50 ETF options, China launched SSE 50 ETF Options and CSI 300 ETF Options.

Options products are seen by experts as the latest moves involving financial reforms launched by the Chinese government in recent years to support technological self-reliance with the help of the capital markets. 

"With such a risk management tool, the STAR market will be more active and liquidity will be better, which will help innovative companies get better financing," said Li Daxiao, chief economist at Shenzhen-based Yingda Securities.

Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, said that the launch of ETF options will attract long-term capital to the STAR board.

"Companies on the STAR market are usually emerging enterprises with high growth potential and high risks. The new contracts can improve the pricing efficiency of spot markets and provide risk management tools for investors and market makers," Dong Shaopeng said.

Chinese officials have stressed that the country will push technological breakthroughs to achieve scientific self-reliance. According to a statement published by the State-owned Assets Supervision and Administration Commission (SACAC) of the State Council, the cabinet, SASAC Director Zhang Yuzhuo stressed that China should adhere to high-level technological self-reliance and strengthen breakthroughs in core technologies. 

Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, said that the development and enrichment of financial derivatives in China is in line with China's two-way opening of the capital market and is designed to meet the needs of a mature market.

Experts said that China will continue pushing reforms in the registration-based IPO system, opening up the futures market and further opening the financial derivatives market.