HKEx prepares for evolving exchange landscape in Asia
The Hong Kong Stock Exchange (HKEx) has laid out a strategic plan for 2010-2012 that will help it adjust the developing competitive landscape and enable it capture more business in mainland China.
HKEx has detailed three core strategies, which include organic growth of its current business, preservation of its current position, and an expansion of its services over the next two years.
According to the exchange’s plan, the growth of the market in Hong Kong is expected to attract rival trading facilities, both from within the region and internationally.
“HKEx has to position itself against emerging competition by strengthening itself and its markets with increased capability, efficiency and competitiveness,” read a summary of the plan.
To help HKEx achieve its strategic goals and remain competitive in the face of competition, the exchange plans to invest in IT infrastructure and expand its product platform, investor base and geographic coverage. It plans to do this by adding new asset classes, introducing new renminbi-based products, facilitating international initial public offerings and launching new functionality to serve mainland investors.
The strategic plan details changes to HKEx’s organisational structure, including the introduction of a new market development division that will encompass issuer marketing, corporate strategy, research and corporate development departments, as well as new platform and mainland development teams. The exchange has set aside US$20 million to hire the new team, charged with increasing the competitiveness of HKEx's market structure and systems.
HKEx has also appointed Lawrence Fok as chief marketing officer, who will be charged with enticing new issuers to list in Hong Kong and be an ambassador for the exchange both on mainland China and overseas. Fok will report to HKEx chief executive Charles Li.
"Our business will continue to evolve in line with the competitive landscape in Asia and the rest of the world, so our organisation must remain nimble," said Li. "Our new structure will help us collaborate more with our constituents and counterparts and develop stronger ties with them as we move to the next phase of our development."
Li announced the new strategy at HKEx’s 2009 results presentation. Profit before tax for the exchange increased 10% in Q4 2009 to US$1.52 billion compared to US$1.38 billion in Q4 2008.Cash trading contributed 33% of revenue, with an average daily turnover of US$62.3 billion.
Although a number of crossing networks offer liquidity in the region’s major centres, competition among trading venues in Asia is still relatively limited with only Japan having a significant number of competitors to the incumbent Tokyo Stock Exchange. However, the Singapore Exchange has teamed up with Chi-X to develop Chi-East, a pan-Asian dark pool scheduled to launch at the end of Q2, while Australia is widely expected to allow competing venues to the Australian Securities Exchange after changing its regulatory structure.