Hong Kong Bourse Seeks to Expand China Ties in 3-Year Plan

Updated on
  • Vision to connect mainland China with world, Charles Li says
  • HKEx will review rules to boost competitiveness as listing hub

Hong Kong Exchanges & Clearing Ltd. plans to expand links with China over the next three years, including starting a system for mainland investors to take part in the city’s initial public offerings.

“Our vision is focused on connecting mainland China with the world,” Chief Executive Officer Charles Li said on Thursday as he unveiled a 2016-2018 strategy. “Only if we focus on China we will be able to develop rapidly and prepare in advance for any emerging risks.”

The exchange will offer more products as it expands mutual access with the mainland, including seeking to open a stock link with Shenzhen and broadening the program to bonds and exchange-traded funds. HKEx is reviewing its competitiveness as a listings venue and considering setting up a third board to attract more companies to sell shares on the world’s fourth-largest stock market, Li said.

HKEx’s plan builds on its efforts to capitalize on fund managers seeking access to Chinese assets, as well as mainland investors wanting to move money out of their home markets. Hong Kong’s link with the Shanghai stock exchange opened in November 2014, while the Shenzhen version was initially expected to start last year. At the moment, investors are fleeing equities on both sides of the border, with benchmark gauges in Hong Kong and Shanghai down at least 15 percent this year.

Two Boards

HKEx currently has a main board, where most of its companies are traded, and the Growth Enterprise Market, which has lower listing requirements.

Initial share sales on the exchange raised $33.7 billion in 2015, up from $29.8 billion a year earlier. The monthly average daily turnover of stocks traded on the exchange hit a peak of HK$198 billion ($25 billion) in April. By December, trading volume had dwindled by more than two-thirds to HK$61.2 billion, hurt by a rout in the mainland market.

Plans are afoot to “financialize” its London Metal Exchange unit through a London-Hong Kong Connect, Li said. HKEx intends to expand the base of users who trade LME contracts and offer products related to gold and steel, Li said. The London-Hong Kong Connect pact allowing participants on HKEx to buy and sell and clear trades on LME was struck in October when Chinese President Li Jinping visited Britain.

The Hong Kong bourse will offer more yuan-related products as the use of China’s currency in international markets increases, Li said.

(Adds comment by CEO in second paragraph.)
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