Exchange merger moves up trading hour agenda

PUBLISHED : Tuesday, 26 October, 2010, 12:00am
UPDATED : Tuesday, 26 October, 2010, 12:00am

With the Australian and Singapore stock markets now planning to unite to form a pan-Asian exchange giant, there seems little room for brokers to continue arguing against the Hong Kong Exchanges and Clearing's proposal to extend the trading hours of the local market.

Some may think the ASX and Singapore Exchange merger has little to do with decisions on local trading hours, but in reality it does. As proposed by HKEx chief executive Charles Li Xiaojia, the extension to trading hours goes beyond the matter of adding an hour and 30 minutes to trade.

It has as much to do with ensuring that trading hours in Hong Kong are aligned with those in Shanghai and Shenzhen.

This is very much what Hong Kong needs.

The HKEx consultation on the changes to trading hours, which will end this Friday, seeks feedback on opening the Hong Kong market 30 minutes earlier so as to match the Shanghai and Shenzhen exchanges which both open at 9.30am.

The HKEx also proposes cutting the present two-hour lunch break by half and moving it to 12pm to 1pm, to align the opening of the afternoon trading session in Hong Kong with Shanghai and Shenzhen which take a lunch break from 11.30pm to 1pm.

This will bring Hong Kong trading into closer alignment with trading on the mainland, although we will close at 4pm, an hour later than Shanghai and Shenzhen.

It makes sense for Hong Kong to have strong partners and Shanghai is a natural choice. We have almost 500 mainland-listed firms, while scores of them are dually listed in Hong Kong and Shanghai.

Synchronised trading hours would help with price discovery.

What is more it will show the HKEx's commitment to work with Shanghai and Shenzhen.

Some brokers are nonetheless resistant to change while others suggest a compromise of taking lunch from 12pm to 1.30pm. All parties to the debate might now pause to take a look at the latest developments. If the Singapore Exchange and ASX go ahead with their plans, the merged market will become the world's ninth largest, closing in on HKEx's ranking at seventh and Shanghai at sixth.

If Hong Kong and Shanghai were to combine, the enlarged market will be the world's second-largest, surpassing Tokyo, Nasdaq, London and Euronext. It will be second only to the New York Stock Exchange.

Appeal to EU for reprieve

Besides the challenge presented by potential mergers of other exchanges, Hong Kong is also at present wrestling with the consequences of proposed regulatory reform by the European Union concerning hedge funds.

The EU wants overseas fund houses to comply with its rules if they wish to sell their funds in any of its member countries.

The Hong Kong government is now lobbying the EU to allow Hong Kong fund managers more time to comply with the rule.

Watch this space.