Regulators warn of volatility ahead of MSCI rebalancing

HONG KONG, Nov 20 (Reuters) - Market regulators in Hong Kong warned investors on Thursday of possible increases in trading activities and the risk of unusual price movements next week during the rebalancing of the MSCI Barra indices.

"The SFC and HKEx are aware of possible increases in trading activities and unusual price movements around the market close during index rebalancing events, period ends and expiration of derivatives contracts," The Securities and Futures Commission and bourse operator, Hong Kong Exchanges and Clearing (0388.HK), said in a statement.

"Exchange participants and investors should be mindful of these market events when making investment decisions."

Changes to the MSCI indices are expected to take effect at the close of November 25, 2008.

The MSCI rebalancing in the quarter before last triggered a sharp increase in the daily turnover and unexpected movements in share prices during the 10-minute closing auction on May 30.

The movement, which caught most investors by surprise, sparked protests from certain quarters over the suitability of a closing auction session in the local market. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)