China launched its decade-long awaited index futures Friday, a milestone in the country's efforts to push the reform of capital market.

The new index saw a strong debut Friday, in contrast with a dip in the country's broader stock market, as investors swarmed toward the new trading tool which allows trades based on their expectations.

Four contracts all rose at the close. The contract for May was bid at 3,450 points at its opening, up 51 points from its benchmark 3,399 points, the base price the China Financial Futures Exchange (CFFEX) set for all four contracts. It declined to end at 3,415.6 points, up 0.49 percent.

Meanwhile, the broader stock market fell with the benchmark Shanghai Composite Index down 1.1 percent, after the government extended further efforts to cool the overheating property market, which dragged down financial and real estate heavyweights.

Index futures tracks the Shanghai-based Hushen 300, an index of 300 Shanghai- and Shenzhen listed class A-shares which fell 1.13 percent to close at 3,356.33 points.

"The introduction of index futures is an important step in deepening the financial market," Tu Guangshao, vice mayor of Shanghai Municipality, said at the launch ceremony, adding "it arrives in line with the market desire and expectation."

The stock index futures, agreement to buy or sell an index at a given value on a future date, would help ease market fluctuations and hedge risks, which is the "market's pressing need", said Cheng Wenwei, director with the research institute of the Bohai Securities.

"China's stock market is the most dynamic developing market, and also the most volatile one," he said.

The country's stock market has been riding on a "roller coaster" in the past years. It advanced about 97 percent in 2007, then plunged more than 65 percent in 2008 and jumped about 80 percent in 2009.

Chinese government has been keen to forge ahead reform of its financial market, but steps were cautious against risks.

"The almost decade-long preparation showed China is moving actively but cautiously toward its direction," Tu Guangshao said.

On Jan. 8 this year, the State Council approved the launch of stock index futures and a margin-trading pilot program, in a move to embark upon further liberalization of its financial market.

Threshold for trade was set high as investors are required to put down cash deposits equal to 15 percent of the contract value for the May and June contracts as a maintenance margin. For the September and December contracts, the margin is 18 percent. They are also required to have a minimum of 500,000 yuan to open a trading account.

The index futures would also help curb speculation in China's fluctuating mainland stock market, in which investors could only turn to short-term speculations for profits instead of long-term value investment, according to analysts.

"The launch of index futures will fundamentally change such phenomenon by easing the fluctuation and let investors focus on blue chips," Yong said.

The market would change "structurally", as more capital would flow to heavyweights or blue chips, said Hu Yuyue, professor with the Beijing Technology and Business University.

History has already proven that in both the United States and Japan, market heavyweights had better performances after the index futures launched in the two markets, a report from Shenyin and Wanguo Securities indicated.

"Investors, especially institutional ones, would feel assured to invest in blue chips with such a risk reducer," Yong added.

According to Zhu Yuchen, general manager of CFFEX, institutional investors are the major target traders of the index futures, as they have already held more than 50 percent of the stocks listed in China's A-share market.

Currently, institutional investors are largely staying on the sidelines to start with as they await specific rules unveiled, although the futures meant more investment options in the capital market with less risk.

Of total 9,137 accounts opened to trade futures on the Hushen 300 as of April 15, 8,944 were made up of individuals ones, data from the CFFEX showed.

Yong said he believed that when the notional trading value of index futures exceeds 50 percent of turnovers at the cash market, the index futures would start to play its function.

"The index futures trading would gradually attract more institutional investors, which would help China's A-share market make a shift and turn to a market led by the blue chips," said Qiu Yanying, chief analyst with Shanghai-based TX Investment Consulting Company.