Hong Kong Stock Exchange

HKEX eyes currency products as stock market turnover hits year low

Monday’s turnover was the lowest this year at HK$43.76 billion.

PUBLISHED : Tuesday, 24 May, 2016, 12:26pm
UPDATED : Tuesday, 24 May, 2016, 12:26pm

Hong Kong Exchanges and Clearing Chief Executive Charles Li Xiaojia on Tuesday unveiled company plans to further expand its fixed income and currency product activities with a number of yuan-related offerings to be launched by the end of this month — followed by a bond connect programme with the mainland.

HKEX, which operates the local stock and futures market, is now looking to expand beyond its traditional focus on equities to move into commodities and fixed income and currency (FIC), the latter of which is much more commonly traded by banks rather than exchanges.

A sharp fall in the Hong Kong stock market’s turnover, which on Monday was the lowest this year at HK$43.76 billion. That represents just one-fifth of the record high monthly average of HK$200 billion in April last year and has forced the local bourse to seek out other revenue streams by launching new products.

Speaking at HKEX’s Fixed Income and Currency conference on Tuesday, Li said that until recently, HKEX had largely been making preparations for its push into the FIC space, but this year they would launch a number of products.

From May 30, HKEX will introduce cash-settled euro-yuan, Japanese yen-yuan, Australian dollar-yuan and yuan-US dollar futures, following on from the existing US dollar-yuan futures which are already being traded.

“The goal is to create a cluster of products to track key trading relationships,” Li said, adding that they hoped to add the yuan-euro, yuan-yen and yuan-Australian dollar futures in the coming months.

Other products that are set to be launched this year include a gold futures trading system where transactions can be settled physically. This will come in two separate tranches, one that can be settled in yuan, and the other in US dollars.

The third product to be launched is a new index which will track the Chinese currency against a basket of others, to be run in collaboration with Thomson Reuters.

Li emphasised that this was not an official index, akin to that run by the People’s Bank of China, but would be wholly transparent, enable trading and also look back five years. The official signing ceremony for the index was held today, and further details of how the index will operate are expected to be announced soon.

Li said that other key areas of HKEX’s plan to expand into fixed income and currency trading related to interest rates and credit products, but that these, especially the latter, would take more time. He said that a cash bond connect scheme, which would allow medium-sized overseas investors access to the Chinese bond market and Chinese investors access to bond markets overseas was part of HKEX’s strategic plan, and while it could happen this year, next year is also a possibility.