Hong Kong Exchanges and Clearing (HKEx) will target mutual market access initiatives with mainland China as part of plans to revitalise its equity markets after a four-year volume low.
According to HKEx’s 2012 results presented today, average daily equity turnover slumped to HK$53.9 billion in 2012, a 23% drop on the HK$69.7 billion traded the previous year and over 25% lower than the HK$72.1 billion recorded in 2008.
The value of IPOs on HKEx also sank, with only HK$90 billion raised in 2012, compared to HK$260 billion in 2011, while the number of stock options traded also declined by 25% to 302,750 contracts.
The Hong Kong bourse’s plans to reinvigorate cash equity trading lie in its push to attract more business from mainland China, including a model for mutual market access, which the exchange thinks will be a “significant catalyst for the structural change in Hong Kong’s capital market”.
Moreover, HKEx stated further growth from the mainland would occur through Chinese companies seeking an offshore listing and the increased ability of China-based investors to trade offshore.
“Recent developments such as B share to H share conversion and the easing of offshore listings by mainland regulation are expected to provide renewed impetus,” read a HKEx statement. “At the same time, to prepare for the increasing participation of mainland investors, we will continue to reach out to international issuers and enlarge our RMB product suite. We will further develop our exchange-traded fund segment as this is a potential facilitator of RMB internationalisation and mutual access with mainland markets.”
Alongside China growth, the exchange’s latest strategic three-year plan targets asset class diversification, primarily through its £1.4 billion acquisition of the London Metal Exchange last year. HKEx has begun integrating the LME, including improving the commodities bourse’s software.
Further growth is expected through the global regulatory push that will result in greater exchange trading and clearing of OTC derivatives and the launch of RMB products including futures, bond index products and exchange-traded funds designed specifically for registered qualified institutional investors, based on bonds.