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Hackers Force Hong Kong Exchanges to Make Filing Changes

Hackers Crashing Hong Kong Bourse Website
Trading in HSBC Holdings Plc (HSBA), Cathay Pacific Airways Ltd. (293) and five other stocks was halted on Aug. 10 and access to filings was disrupted again yesterday. Photographer: Nelson Ching/Bloomberg

Hong Kong Exchanges & Clearing Ltd. said it will find new ways of publicizing earnings and other corporate events after hackers jammed its public news website.

The bourse, acting to safeguard communications from listed companies, will use e-mails and newspaper ads to back up its online system, Chief Executive Officer Charles Li said yesterday at a briefing. While the exchange’s news site appeared to be working today after two days of disruptions, spokesman Scott Sapp declined to confirm it was operating without any glitches.

Hong Kong Exchanges halted trading of HSBC Holdings Plc, Cathay Pacific Airways Ltd. and five other stocks on Aug. 10 after what Li described as a “sustained and systematic” attack on its computer system may have prevented investors from accessing price-sensitive filings. The bourse is at least the second this year to report an attack by hackers.

“If you look at this event in a broader sense, it does raise the level of alert,” said Michael Liang, chief investment officer at Foundation Asset Management (HK) Ltd., which oversees $120 million. “The exchange should probably look into its infrastructure and make sure it’s not compromised by an event like this.”

More Sophisticated

Hong Kong Exchanges shares rose 0.4 percent to HK$137.10 today. The stock is valued at about 27 times reported profit, making it the fifth-most expensive bourse operator in the world, according to data compiled by Bloomberg.

While the company has defended itself against previous attempts, this was more sophisticated, Li said. The target was the news disclosure service and the exchange’s trading and clearing operations haven’t been affected, he said.

The assault was a so-called distributed denial of service attack aimed at preventing access to the exchange’s public news feed by overwhelming its capacity to handle website traffic, Li said. Should the hackers change strategies, Li said the bourse may not be able to defend the website and its backup online bulletin board.

“We don’t even know who they are now, so we don’t know how to prevent them from attacking us,” Li said. “We can try to defend it when it does come, but we cannot prevent it from happening.”

‘Suspicious Files’

The hacking, from remote-controlled computers around the world, was complex and took time to filter and analyze, Chief Technology Officer Bill Chow said. Previous assaults were easier to block, he said.

In March, the U.S. National Security Agency joined the investigation of an October 2010 attack on Nasdaq OMX, according to people familiar with the probe. The second-largest U.S. equity exchange operator by trading market share said in February that “suspicious files” discovered on a website prompted it to start an investigation with federal authorities into possible computer hacking.

Hong Kong Exchange’s website was last disrupted in late 2009, Li said. That attack targeted the company’s corporate website and not the news service, he said.

The website “is probably a weak link when it comes to an exchange,” said Simmy Grewal, a London-based analyst covering European and Asian equity market structure for Aite Group LLC. “It’s a worry that it has happened a second day because it means they haven’t been able to solve the problem.”

The exchange suspended trading of companies that published price-sensitive information, including on earnings and acquisitions, after 12 p.m. on Aug. 10 to ensure investors had equal access to statements, Li said.

Computer Crimes

HSBC, which makes up 15 percent of Hong Kong’s Hang Seng Index, and Hong Kong Exchanges, which has a 2.6 percent weighting, were suspended on Aug 10. Cathay Pacific, Dah Sing Banking Group Ltd., Dah Sing Financial Group, China Resources Microelectronics Ltd. and China Power International Development Ltd. were also halted. All companies resumed trading yesterday.

The Technology Crime Division of the Hong Kong Police’s Commercial Crime Bureau is investigating the matter, Anita Chow, a spokeswoman for the force, said. The Securities and Futures Commission is also following up, spokesman Jonathan Li said.

“The worry is that the stock exchange is not handling this properly,” said Pauline Dan, who oversees about $600 million as chief investment officer at Samsung Asset Management Hong Kong. “If this only concerns a single website that’s not linked to the trading system, that’s something we can live with. If this happens again, there need to be alternative ways for people to gain access to the information, maybe by newspaper or radio broadcast or another website.”

Sony, Citigroup

The bourse joins companies from Sony Corp. to Citigroup Inc. that have been targeted by hackers. This week’s attack on the bourse’s news site came as Hong Kong stocks were rebounding following a global rout spurred by concern that the U.S. economy is slowing and Europe won’t be able to contain its sovereign-debt crisis.

“Increasingly, you have situations like this happening and not just related to the stock exchange,” said Foundation Asset Management’s Liang. “I guess people get less paranoid about it. It’s just a fact of life we have to deal with.”

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