Alibaba Breakdown Pressures HKEx on Volumes: Chart of the Day

The breakdown in talks between Hong Kong Exchanges & Clearing Ltd. and Alibaba Group Holding Ltd. for an initial public offering is adding pressure on the world’s fourth-largest bourse to boost trading volumes.

The CHART OF THE DAY shows the value of shares traded on Hong Kong’s exchange fell last month to the lowest level since April 2009 when compared with combined turnover on the Nasdaq Composite Index and bourses in Shanghai, Tokyo, London, Toronto, Paris, Sao Paulo, Mumbai and Frankfurt. About $5.6 billion of shares changed hands on average daily during the past 100 days in Hong Kong, versus $69 billion at the global exchanges.

Alibaba is moving toward a New York listing after discussions with the Hong Kong exchange broke down, according to two people familiar with the matter. Investment banks have valued China’s largest e-commerce company, founded by Jack Ma, at as much as $120 billion, which would rank it third after Google Inc. and Inc. among Internet businesses.

“There’s obvious downside from what would very likely have been a fantastic IPO for HKEx and subsequently, a huge volume driver for the market,” said Matthew Smith, an analyst at Macquarie Group Ltd. in Singapore. “But it would have been difficult for them to abrogate their own rules just because it’s Alibaba.”

Alibaba’s management had sought to keep control of the board by retaining the power to nominate most board members, a person familiar with the matter said last month. Hong Kong doesn’t allow share classes with different voting rights, as U.S. exchanges do. Lorraine Chan, a spokeswoman for Hong Kong Exchanges, declined to comment, as did Alibaba.

Hong Kong Exchanges shares have trailed the Bloomberg World Exchanges Index of 27 bourses in the past two years, the lower panel shows. Daily trading in the city has fallen 50 percent from the peak of $11.2 billion in December 2007. Stock exchange turnover is still 32 percent higher than last year’s September low. Companies have raised $7.6 billion through IPOs in the city this year, compared with $20 billion in the same period in 2010.

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