HKEx hints at plan to diversify
The Hong Kong stock exchange intends to diversify its business, with yuan-denominated products and commodities becoming crucial to its long-term expansion plans, HKEx senior management said yesterday.
Tae Yoo, the senior vice president responsible for platform development and strategy at Hong Kong Exchanges and Clearing, made the forecast in a panel discussion at a trading summit organised by FIX Protocol.
HKEx plans to launch offshore yuan-denominated futures in the third quarter of this year.
The proposed futures would allow investors to trade the yuan against the dollar and require delivery of dollars by the seller and payment settled in yuan in Hong Kong by buyers when the contracts matured.
The platform would be a hedging tool for those exposed to the yuan, which already trades in a widened daily band allowing more fluctuations in the currency's rate.
Analysts said HKEx's bid to expand into yuan-related business had yet to translate into higher profitability. Hong Kong Exchanges and Clearing reported an uninspiring first-quarter net profit of HK$1.15 billion, down 7 per cent year on year, although it was 3 per cent above the market estimate of HK$1.12 billion.
Off-shore yuan-denominated products are subject to approval by both Hong Kong and mainland regulators. One of the most recent examples is the China Securities Regulations Commission's approval for the launch of yuan-denominated exchange-linked funds in Hong Kong.
Tae also said HKEx would identify more partnerships with other exchanges to expand into the commodities platform, including possible over-the-counter derivatives clearing, and listed futures products.
'Hong Kong is historically not an established player when it comes to fixed income, currency and commodities,' Tae said. 'It is something we would further advance into.'
But he did not comment on HKEx's bid to acquire the London Metal Exchange. The LME, with an estimated value of up to ?.5 billion (HK$18.8 billion), is a major global non-ferrous-metals market, offering futures and options contracts .
The LME said yesterday it had received multiple proposals that might lead to a takeover. CME Group, NYSE Euronext and Intercontinental Exchange have made preliminary offers, according to three sources. Bids had to be submitted by Monday.
Mederic Gehl of BNP Paribas said Asian investors had become more interested in commodities as an alternative asset class as a result of the volatility in equity markets and high inflation.
The London Metal Exchange posted a record sales volume last year, equivalent to this amount in annual revenue, in US dollars