(Adds MSCI quote, additional details) HONG KONG, Aug 20 (Reuters) - The Hong Kong exchange operator said it would launch its first derivatives product based on onshore Chinese shares, which its partner, index provider MSCI, said would help resolve a major issue for international institutions investing in China. The new futures contract, to be launched in October, will be based on the MSCI China A 50 Connect Index, made up of 50 of the largest A-shares - Chinese shares traded onshore - including at least two stocks from each industry sector, Hong Kong Exchanges and Clearing (HKEX) said in a statement. International investors have been increasing their exposure to onshore-listed Chinese stocks in recent years, but often complain that they have limited access to derivatives products like futures to manage their risk. MSCI here this is one factor preventing them from increasing the weighting of China A shares in their benchmarks. “The launch of MSCI China A share index futures in Hong Kong is a positive step towards resolving one of the four market accessibility issues highlighted by global investors,” Henry Fernandez, MSCI’s chairman and CEO told reporters. HKEX and MSCI have been trying to launch such a product for several years, having signed an agreement in March 2019 to launch China A shares futures, subject to regulatory approval. The plan at that time was to launch futures based on a different benchmark, the 421 company MSCI China A index, but this has been superseded by the new product. The news is a boost for HKEX, which for years has been trying to diversify its revenues away from share-trading fees. HKEX last year launched several Asia and emerging markets futures and options contracts also under a licence deal with MSCI. Regional rival Singapore Exchange currently offers a futures contract tracking A shares. In a separate statement on Friday, the China Securities Regulatory Commission (CSRC) said the launch of the new product would help to attract more long-term foreign capital into mainland China stocks. The CSRC said it and Hong Kong’s Securities and Futures Commission had improved their cooperation mechanisms related to supervising derivatives to enable the launch of the new product. The Chinese regulator also said it would deepen reforms in China’s domestic index futures market, to promote coordinated development of onshore and offshore derivative markets. (Reporting by Alun John in Hong Kong and Samuel Shen in Shanghai Editing by Jane Merriman, Kirsten Donovan) Our Standards: The Thomson Reuters Trust Principles.