Longer hours don't always mean more business
The extension of local futures trading may be no panacea for weak demand and thin turnover
Past extensions of stock market trading hours have failed to boost turnover. So will the six-hour extension of futures market trading from next Monday make any difference?
Many remember brokers marching on the streets to oppose changes to trading hours. The exchange, after more than a decade of deadlock and debate with those brokers, in the end went ahead and extended the stock market trading session from four hours a day to the current 5½ hours a day.
The extension in two phrases - the first in March 2011 and the second a year later - has seen the market open 30 minutes earlier and the two-hour lunch break cut to one hour.
Many brokers complain that the extension of trading forces them to wolf down their lunches and gives them less time to meet clients. The lunchtime analyst briefing, meanwhile, has vanished.
Despite the longer trading hours, turnover dropped 23 per cent last year as a result of weak market sentiment. In other words, it's clear that if customers have no interest in buying, there's little point in opening the shop for longer. The plan to extend futures trading will again throw the spotlight on this issue.
The new session, which runs from 5pm to 11pm starting next Monday, will trade Hang Seng Index and H-share index futures. Gold futures, which were initially included the plan, have been excluded because of the lack of trade in the contract.
Some brokers are still opposed to extended trading, not because they fear a drop in turnover, but because of concerns about risk management.
As legislator Christopher Cheung Wah-fung says: "What we most fear is that the speculators will try to manipulate the market. The Securities and Futures Commission should [keep] a close eye on it."
Some brokers say they are not worried about the new session adding costs to their operations, as they already offer night trading on overseas markets to their clients and employ night-shift staff.
Adding an evening session will double Hong Kong futures trading to 12 hours. But don't feel too proud - the local exchange is still dwarfed by its overseas counterparts; US markets trade 23 hours a day and Singapore puts in 16.
Nevertheless, Cheung says that since turnover is down and many brokers are struggling, something new such as night trading might attract more new income.
Evening coffees all round for our broker friends next week.
More on investment.
The government wants to change the law to allow it to issue up to HK$200 billion of bonds, up from HK$100 billion. Unlike Europe, Hong Kong does not have a debt problem, and the government bond and iBond programme can help promote the local bond market.
Statistics show up to 15 per cent of iBond investors are first-time bond buyers. And that shows government borrowing may sometimes be no bad thing.
