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Timing strengthens HK's competitiveness

PUBLISHED : Tuesday, 21 June, 2011, 12:00am
UPDATED : Tuesday, 21 June, 2011, 12:00am

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Extending the trading hours of the Hong Kong stock market is intended to bring the bourse closer to international practices and allow investors more time to trade on the Hang Seng Index.

The Hong Kong Exchanges and Clearing (HKEx) believes the move has improved cross-border trading for mainland-related securities listed in Hong Kong by increasing the overlap of trading hours with mainland exchanges.

It also believes its competitiveness is strengthened by narrowing the gap between its trading hours and those of its regional competitors. Implemented in March, the trading sessions of HKEx's securities market are starting 30 minutes earlier, running from 9.30am to noon, and then from 1.30pm until 4pm.

Terence Ho, Ernst & Young's Greater China IPO leader, says the revised trading hours provide alignment between Hong Kong and regional exchanges. 'The compatible [hours] with the mainland stock exchanges means any issue of mainland companies releasing sensitive financial information before the Hong Kong exchange opens has been eliminated.'

However, not everyone is happy. Next year, the lunch break is scheduled to be reduced by a further 30 minutes. Local brokers have already complained that trimming 30 minutes off their two-hour break has curtailed chances of a leisurely lunch. While agreeing in principle with the extended trading hours, Jackson Wong, vice-president at Tanrich Securities, says with the HKEx opening the same time as the mainland bourses, the initial 30 minutes of exhilarating trading has been lost. 'We used to be able to see what was happening on the mainland and Tokyo exchanges because they opened earlier than Hong Kong.'

He adds that brokers will have less time to spend with clients when the HKEx lunch break is further cut next year. 'Brokers also use the lunch break to discuss strategies and share market views with colleagues, which will need to be reviewed,' Wong says. The decision to extend the trading hours was based on the feedback collected from a six-week public consultation.

However, longer trading hours have yet to translate into a higher turnover. From January to April, average daily turnover was HK$79.74 billion, up 16 per cent year-on-year. Yet, the average daily turnover in May was HK$64.59 billion, down 18.84 per cent from April.

Daniel Lin, managing partner of Grant Thornton Jingdu Tianhua, says benefits of longer HKEx trading hours are intangible. 'The HKEx is simply keeping up with the norm by no longer being one of the stock exchanges with the shortest trading hours. Investors now have more time to react to market movements. [We] should remember that some stock exchanges operate without a lunch break.'

In another move, HKEx has said it would seek comments from market participants on the introduction of after-hours futures trading, aiming to capture a larger share of Asia's fast-growing derivatives market. It says research reveals many futures brokers in Hong Kong were open in the evening to offer trading of European and United Stares futures during London and New York trading hours.