In this file photo, men ride on an escalator past an electronic screen and ticker board displaying stock figures at the Singapore Exchange Ltd (SGX) headquarters in Singapore on Thursday, Jan. 19, 2017. (ORE HUIYING / BLOOMBERG)  

Singapore’s role as a regional equity derivatives trading center may be curtailed after it lost a major index-licensing deal to Hong Kong. The next battle front between the two Asian financial hubs will be on Chinese mainland stock futures.

Singapore Exchange Ltd is currently the only overseas platform where investors can trade mainland A-share futures, and the product accounts for about half of the bourse’s equity derivatives volume. That may be short-lived

Rivalry in the hedging tool for mainland equities sets up a skirmish between the cities that have competed as centers for a range of finance businesses from share listings to wealth management, analysts say.

Singapore Exchange Ltd is currently the only overseas platform where investors can trade mainland A-share futures, and the product accounts for about half of the bourse’s equity derivatives volume. That may be short-lived as Hong Kong Exchanges & Clearing Ltd said last year it’s working on a similar hedging tool for mainland stocks with MSCI Inc, which is still pending regulatory approval.

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“The launch would end Singapore Exchange’s monopoly on offshore derivatives based on China’s A shares,” said Bruce Pang, head of macro research at China Renaissance Securities.

The stakes are high for SGX as equity-derivatives sales alone accounted for 36 percent of its total revenue for the quarter through March. Meanwhile, the exchange is facing other challenges such as a slowdown in listings and India’s decision to move trading onshore for some futures contracts from Singapore.

“China is a major part of SGX’s portfolio, and as China internationalizes, Singapore’s role in serving global trade between the mainland and the rest of the world becomes even more relevant,” a spokesperson from the bourse said in an email in response to Bloomberg queries.

MSCI last month announced it will move licensing for derivative products on a host of gauges to the Hong Kong Special Administrative Region from Singapore. As a result, the North Asian city will soon start selling 37 futures and options contracts based on MSCI’s Asian and emerging-market equity measures, with launches for Taiwan, the mainland and India futures slated for as early as July.

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To make up for the loss in revenue, analysts see SGX developing its own Asia-focused products and collaborating with FTSE Group and other index providers.

“Their strategy is likely to head toward self-developed products such as single stock futures, smart beta indices, which give higher margins plus SGX will have more control over them,” said Joel Ng, an analyst at KGI Securities (Singapore) Pte.

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The exchange has followed through with its plan to initiate futures trading on individual Singapore-listed stocks this month, and recently acquired a 93 percent stake in Scientific Beta Pte, an index provider that specializes in factor-based strategies.

MSCI and FTSE declined to comment.

“Hong Kong is servicing the Chinese market and Singapore is more about Southeast Asia,” said Michael Wu, an analyst at Morningstar Inc. “There’s growth in both locations.”