H.K. and mainland bourses weigh up joint venture

PUBLISHED : Friday, 19 August, 2011, 12:00am
UPDATED : Friday, 19 August, 2011, 12:00am


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Hong Kong Exchanges and Clearing (HKEx) says it is talking to its mainland counterparts about setting up a joint venture to develop index or equity derivative products, although details remain sketchy.

'Currently the possible areas of business operation of the joint venture company include, but are not limited to, the development of index and other equity derivative products and the compilation of new indexes,' it said in a statement.

Brokers believe this marks a significant development in the relationship between HKEx and the Shanghai and Shenzhen exchanges away from being rivals and towards becoming business partners. The three bourses are in detailed talks about setting up a joint venture company in Hong Kong.

'This is a good move. HKEx and the Shanghai Stock Exchange could end their past relationship as competitors,' said Chim Pui-chung, the legislator representing the financial services sector. 'The three bourses could work together on some big projects, such as developing a platform for more cross-border listings or cross-border trading.'

Yesterday's announcement comes at a time when exchanges have been jockeying for alliances or mergers. A Singapore Exchange plan to merge with Australia's ASX, leapfrogging HKEx in the process, set off alarm bells last year, although the deal ultimately collapsed.

Chim said HKEx and the two mainland bourses would probably not merge because their structures were different. HKEx is a listed company, with a range of shareholders, including the government, with 5.88 per cent, while the two mainland bourses are owned by the mainland government.

'The joint venture would benefit both HKEx and the two mainland bourses. HKEx is now the first in the world to link up with the two mainland stock exchanges, the world's second largest economy. This will help it compete with other overseas exchanges and new trading platforms such as dark pools,' Chim said. The three bourses chose Hong Kong because it is more international and has more flexibility with products and services, according to people familiar with the matter.

The announcement coincided with a visit from Vice-Premier Li Keqiang. On Wednesday, Li announced a range of measures to support the local economy and boost investor sentiment.

Secretary for Financial Services and the Treasury Professor Chan Ka-keung said Li had endorsed the proposed joint venture during a visit to HKEx on Wednesday, urging the move to go ahead as soon as possible.