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HKEx Said to Plan Coal Futures as CEO Li Makes Commodities Push

Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Charles Li is said to be picking coal for his company’s first energy product a year after paying a record price for the world’s top metals bourse.

The world’s third-largest exchange operator will introduce thermal coal futures in Hong Kong this year, according to two people with knowledge of the matter. The futures will be denominated in the Chinese currency, said the people, who asked not to be identified because the information isn’t public. Scott Sapp, a Hong Kong-based spokesman for the company, declined to comment in an e-mail.

Hong Kong Exchanges is competing with IntercontinentalExchange Group Inc. and CME Group Inc. to expand in commodities markets, where derivatives trading is growing at a faster rate than in stocks and bonds. China is the world’s biggest producer and importer of thermal coal, the variety used in power stations.

“One motivation for offering these types of futures contract is that China is a big user of thermal coal,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. said today by phone. “This would potentially give Chinese buyers a hedge on purchases.”

Li spent $2.2 billion buying the London Metal Exchange in December 2012, the most expensive bourse acquisition over $1 billion since at least 2000, according to data complied by Bloomberg. LME contracts include copper and molybdenum, with no fuel products.

Commodity Gains

Trading in commodity derivatives jumped 23 percent last year, outpacing gains in interest rates and currencies, according to a March 10 report from the London-based World Federation of Exchanges. Equity volumes fell 5.3 percent, it said.

Thermal coal futures introduced on the Zhengzhou Commodity Exchange in September totaled 8.7 million contracts, or 1.7 billion metric tons, by the end of the year, according to the bourse’s website. That compares with 154 million tons that Morgan Stanley forecasts for China’s seaborne demand this year.

Prices at the port of Newcastle, an Asian benchmark, fell to $72.98 a ton in March, the lowest since October 2009, according to globalCOAL, a London-based data provider. Spot prices averaged $85.27 last year and $77.51 in 2014.

Shares of Hong Kong Exchanges closed 2 percent higher at HK$144.70 in Hong Kong today.

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