Hong Kong stockbrokers may lose their traditional two-hour lunch break, the longest among the world’s 20 largest markets, as the city’s exchange seeks more business from China.
Hong Kong Exchanges & Clearing Ltd., operator of Asia’s third-biggest stock market, will start consultation on the move that Chief Executive Officer Charles Li said would align the city more closely with China. The stock exchange proposes trading begin a half hour earlier at 9:30 a.m. with a one-hour break at noon, keeping the close at 4 p.m., Li said in Hong Kong on Aug. 11. Shanghai’s trading hours run from 9:30 a.m. to 3 p.m. with a 90-minute break between 11:30 a.m. and 1 p.m.
“God knows if that would mean ordering McDonald’s for company lunch presentations,” said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. “No more long lunches at the Conrad or Shangri-La hotels.”
The move comes seven years after the exchange withdrew an attempt to shorten the two-hour lunch break amid opposition from brokers. Li revealed the newest plan after the bourse announced a 3 percent increase in first-half profit. Hong Kong is competing with Shanghai to maintain its position as China’s pre-eminent financial center and is anticipating a surge in demand from mainland investors as China relaxes currency controls.
Hong Kong’s bourse is ready for yuan-denominated products, which will start when China’s policy makers find a way to allow free inflow and outflow for the currency, Li said two days ago. The exchange’s three-year strategic plan released in March included plans for products such as yuan-denominated bonds to capitalize on the liberalization of China’s financial markets.
“Extending trading hours is a good call, particularly in terms of alignment with China,” said Steven Leung, director of institutional sales at UOB-Kay Hian Ltd. in Hong Kong. A single hour for lunch “will be a little more rushed. We now have sufficient time for meetings with Hong Kong-based listed companies over lunch. But with that change, we’ll probably need someone back in the office to cover for us and handle trading.”
An average HK$61.8 billion ($8 billion) of shares traded daily this year in Hong Kong, exchange data show. That’s compared with 105.6 billion yuan ($15.6 billion) in Shanghai, home to the bigger of China’s two stock exchanges.
Singapore Exchange Ltd., operator of the city state’s derivatives and securities exchange, may scrap its 90-minute midday break altogether, Chief Executive Officer Magnus Bocker said July 23. Eliminating the break could boost trading volumes by 8 percent to 10 percent, he said.
While extended hours allow more people in more time zones to access a given market, longer trading days don’t necessarily lead to more stock changing hands, said Jesse Lentchner, chief executive officer of BTIG LLC’s Asia Pacific operations.
“There is a core amount of trading that happens in a market and if you stretch that out, you lose a certain amount of heat,” Lentchner said, referring to the intensity of market activity. “There is very little correlation between longer trading hours and trading volumes.”
Deutsche Boerse AG, Europe’s largest stock exchange by market value, shortened its trading hours in 2003 after lengthening the market day failed to boost business and riled equity traders. The Philippine Stock Exchange scrapped its afternoon session in October 2008 after an eight-month trial saw volumes fall and the key index tumble 26 percent.
‘Few More Drinks’
Allan Zeman, an entrepreneur with interests in restaurants and nightclubs in Hong Kong’s financial district, said he did not expect shorter lunches for brokers would cause too many problems for his business.
“I don’t think it is going to be too big a deal,” said Zeman. “If you have two hours, of course you can draw it out and have a few more drinks, but at the end of the day, whatever business needs to get done can generally get done within an hour.”
Jeremy Evrard, manager at Caprice, a three-Michelin starred restaurant at the Four Seasons Hotel Hong Kong, was less certain. Shorter broker lunches might mean adjustments would have to be made to the timing of dishes.
“It could affect our business,” Evrard said in a phone interview. “Our customers spend an hour to an hour-and-a-half for lunch at our restaurant. Ninety percent of them have three courses for lunch.”
Shares in Hong Kong Exchanges have lost 10 percent in 2010, more than the 3.8 percent drop by the benchmark Hang Seng Index.
The bourse said in the statement accompanying its earnings two days ago that it has been seeking listings from countries including Australia, Brazil, Germany, Mongolia, and Japan. Of stock markets in those countries, only Japan’s maintains a lunchtime trading break, which runs to 90 minutes.
Extending trading hours “would make a lot of sense in bringing Hong Kong in line with the majority of global markets,” Fulbright’s Lun said. “I’d counter-propose a 1 1/2 hour lunch. Even though our liquid lunches will be gone, there’ll at least be semi-solid lunches for us.”