The KLCI Futures Index: A Comprehensive Guide


The KLCI Futures Index is one of the most actively traded indices in Asia, with investors and traders keeping an eye on it for market signals. It is a futures contract that tracks the performance of the Kuala Lumpur Composite Index (KLCI), which is the benchmark stock market index in Malaysia. In this article, we will delve into the details of the KLCI Futures Index and shed light on the vital information traders and investors should know.

How the KLCI Futures Index Works

The KLCI Futures Index is a derivative contract that speculates on the performance of the KLCI index in the future. The futures contract is based on the underlying asset, i.e. the KLCI index, with a specified expiration date. Traders and investors trade the futures contract by betting on the price either going up or going down. If a trader or investor believes that the KLCI index will go up in the future, they will buy the futures contract, and if they believe it will go down, they will sell the futures contract.

The margin requirement for the KLCI Futures Index is 10% of the value of the contract. For example, if the value of the KLCI Futures Index is RM 10,000, the margin requirement will be RM 1000. The margin acts as collateral to cover any potential losses that may occur in the future.

The settlement of the KLCI Futures Index is based on the final settlement price of the KLCI index. The final settlement price is the closing level of the KLCI index on the last trading day of the futures contract.

Why the KLCI Futures Index is Important

As mentioned earlier, the KLCI Futures Index is an essential indicator of the Malaysian stock market’s performance. It helps traders and investors to gain exposure to the Malaysian stock market while mitigating the risks involved. It also provides an avenue for hedging strategies, where traders can protect their stock portfolio from potential downside risks by taking advantage of the futures contract’s flexibility.

Furthermore, the KLCI Futures Index’s price movements can help traders and investors identify trends in the Malaysian stock market and take appropriate trades accordingly. For instance, a sharp decline in the KLCI Futures Index may indicate that the market is headed downwards, giving traders an opportunity to sell their long positions or open short positions. Conversely, a rise in the KLCI Futures Index may demonstrate an upward trend, prompting traders to buy long positions.

In conclusion, the KLCI Futures Index is an excellent tool for traders and investors to gain exposure to the Malaysian stock market, hedge their positions, and identify trends in the market. As with any investment, it is essential to conduct comprehensive research and understand the risks involved before trading the KLCI Futures Index.