HKEx and China Minsheng Banking sign commodity agreement

Agreement will let bank promote commodity products to mainland clients

PUBLISHED : Thursday, 24 April, 2014, 1:14am
UPDATED : Thursday, 24 April, 2014, 1:14am

Hong Kong Exchanges and Clearing (HKEx) and the Hong Kong branch of China Minsheng Banking Corp yesterday signed a memorandum of understanding (MOU) which will allow the local bourse to promote its soon-to-be launched commodity products to the lender's mainland clients.

Minsheng is not yet a futures broker member of HKEx. But the mainland bank is a major financier for many mainland commodity players. The MOU would allow HKEx to access the bank's client base to promote new commodity contracts in aluminium, copper and zinc, and in thermal coal. The exchange has said the contracts will begin trading later this year. HKEx is the parent firm of the London Metal Exchange, which it bought in 2012.

MOUs … are an ideal way for us to collaborate with a wide range of banks

"MOUs like this one are an ideal way for us to collaborate with a wide range of banks and organisations not yet part of our exchange participants community," said Charles Li Xiaojia, chief executive of HKEx, who signed the MOU with Minsheng vice-chairman Hong Qi.

Hong said the bank would consider joining the exchange as a futures trading member. If it does so, the lender could act as broker to trade for its mainland clients on the local bourse. The HKEx's new commodity platform would allow all 180 futures broker members of the exchange to trade the commodity products.

"Commodities business is a key business of our bank in recent years," Hong said, adding Minsheng launched a bulk commodity financing business last year. "With the platform for HKEx, we believe that our bank can perfectly combine commodity management and the use of finance to provide clients with ideal financial solutions."

Li believes the Hong Kong commodity products would be used by large mainland state-owned enterprises as well as small and medium-sized firms. He added HKEx would explore opportunities to sign similar agreements with other mainland banks and commodity users.

"There are hundreds and thousands of SMEs in the mainland which have a need to hedge their risks given the fluctuations of metal and energy prices. There are also many high-net-worth individuals who would be invested in trading commodities. They are the potential investors of the new HKEx platform," Li said.