1 H-shares Index Options Launch Date : 14 June

2 Why Introduce H-shares Index Options? u H-shares Index Futures have been actively traded since 8 Dec The introduction of H-shares Index Options will complement the trading of H-shares Index Futures. u Since the launch of H-shares Index Futures market participants have requested HKEx to launch H-shares Index Options. This product can assist market participants to better manage their exposure in H-share portfolios. u To meet the growing trading interest in the H-shares market and to deepen the liquidity of the underlying cash market and derivatives market. 2

3 HKEx - Market for H-shares u During the period Jul 1993 to Apr 2004, H-share companies raised more than $201 billion in Hong Kong. u As of Apr 2004, there were 98 companies whose H-shares were listed on the Stock Exchange (66 on the Main Board and 32 on GEM). u At the end of Apr 2004, there was a total of 55 H-shares Index warrants from six issuers listed on the Stock Exchange. 3

4 Investors’ Interest in H-shares Avg Daily Turnover 2002 $581 Mil 2003 $2,041 Mil 2004* $5,006 Mil +145% increase from 2003 * Jan – Apr 2004 Market Capitalisation (year end) 2002 $132 Bil 2003 $408 Bil 2004* $333 Bil * 30 Apr

5 H-shares Index Futures Actively Traded u Underlying Index : HSCEI (Hang Seng China Enterprises Index) u H-shares Index Futures introduced on 8 Dec u The total volume from Jan - Apr 2004 reached 491,313 contracts and average daily volume was 6,103 contracts. u The volume and open interest set new records of 23,670 contracts and 27,092 contracts on 27 Apr 2004 and 28 Apr 2004 respectively. 5

6 The Volume and Open Interest of H-shares Index Futures (8 Dec 2003 – 30 Apr 2004) 6

7 HSCEI Statistics and Characteristics u Index Level - 3, (as of 10 May 2004) u Market capitalisation of HSCEI - $296 billion (as of 10 May 2004) u Average daily turnover (Jan - Apr 2004) - $3.9 billion, accounting for 24% of total equity turnover (Main Board and GEM) u High Volatility (Q – Q1 2004) u Good Return (Q – Q1 2004) HSCEIHSIS&P500 31%17%14% HSCEIHSIS&P %48%31% 7

8 Performance of HSCEI 8

9 20-Day Annualised Volatility for HSCEI 9

10 Recent Changes to HSCEI uOn 8 Mar 2004, six constituent stocks were added while one constituent stock was removed from the HSCEI. uThe number of constituents was increased from 32 to 37 stocks. uThe HSCEI’s market capitalisation rose from $319 billion to $387 billion. uThe new constituents expanded the representation and industry coverage of the HSCEI. uStocks added:  China Life Insurance Co. Ltd.,  PICC Property and Casualty Co. Ltd.,  Great Wall Automobile Holding Co. Ltd.,  AviChina Industry & Technology Co. Ltd.,  Weiqiao Textile Co. Ltd.,  Fujian Zijin Mining Industry Co., Ltd. 10

11 H-shares Index Options Contract Specifications u Trading Symbol: HHI u Contract multiplier = $50 u Minimum Fluctuation: 1 index point u Strike Interval: 100 index points u Contract months are the same as HSI Options - Spot Month, the next two calendar months, and the next three calendar quarterly months u Exchange Fee : $3.50 u Commission : Negotiable 11

12 Introduction of Four Additional Stock Options and Futures u Additional Stock Options and Futures on the following H- shares will also be introduced on 14 June 2004:  China Petroleum & Chemical Corporation (“Sinopec”)  China Life Insurance Co. Ltd. (“China Life”)  China Telecom Corporation Ltd. (“China Telecom”)  Aluminum Corporation of China Ltd. (“Chalco”) u To complement the trading in H-shares Index Options u To offer trading and hedging instrument for H-shares u The total number of stock options and futures will be increased to 37 and 36 respectively. There will be options and futures on six HSCEI constituents. 12

13 Statistics of Sinopec, China Life, China Telecom and Chalco Stock Name Weighting In HSCEI (%) (30 Apr 2004) Market Capitalisation (HK$ Bil.) (30 Apr 2004) Avg. Daily Turnover (HK$ Mil.) Jan – Apr day Annualised Volatility (%) Jan – Apr 2004 Sinopec (386) 14.7% % China Life (2628) 10.3% % China Telecom (728) 6.1% % Chalco (2600) 4.9% % 13

14 Questions and Answers