Bank of China

LME hopes to attract more members from China

China buys many of the metals traded on the exchange and officials believe more brokers will be attracted to take seats on the bourse

PUBLISHED : Tuesday, 04 December, 2012, 12:00am
UPDATED : Tuesday, 04 December, 2012, 4:17am

London Metal Exchange, which got regulatory approval last week to become part of Hong Kong Exchanges and Clearing, believes more Chinese banks and brokers will apply for membership as more mainland investors trade metal.

BOCI, the investment banking arm of Bank of China, is LME's sole Chinese member even though China is the world's largest consumer of many of the metals traded on the exchange.

LME head of education and marketing Catherine Markey, who is touring Hong Kong, believes more Chinese financial firms might be interested in joining the bourse.

HKEx in June agreed to pay £1.39 billion (HK$17.25 billion) to acquire LME in a bid to branch into commodities trading.

The deal was cleared by Britain's Financial Services Authority on Thursday. On the same day, HKEx announced plans to issue new shares to raise HK$7.7 billion to finance its acquisition.

In a report on the HKEx shares placement, Credit Suisse said: "The investment case for HKEx is longer-term growth as China opens up. Further expansion into commodities trading in our view helps cement this role (and reduces risk of HKEx getting marginalised), with medium term upside should they execute well."

LME's electronic trading platform, LMEselect, shows Asian investors' daily trading volume this year has grown 9 per cent over last year.

The electronic platform represents the major chunk of trading on the exchange. Investors can also trade through the telephone or in the traditional trading ring, where traders use hand gestures and shout out prices to strike deals.

Christopher Cheung Wah-fung, financial services sector legislator, also believes mainland and Hong Kong brokers could be attracted to the exchange.

"After HKEx has spent so much to acquire LME, the two exchanges should have a closer connection," he said.

"It would be ideal if there is more cross-trading such as allowing all 400-plus Hong Kong brokers to trade LME products so that we can offer our investors more variety while LME can diversify its investor base," he said.

The LME, the world's largest metal exchange that traded US$15.4 trillion worth of contracts last year, handles a range of metals from aluminium to copper and tin.

It has an office in Singapore but has no plans to set up an office here.

"We believe that with HKEx as its new parent company, the latter will handle the promotional and educational work for it," Markey said.

The HKEx yesterday teamed up with the LME to host a two-day media workshop to introduce its newly acquired bourse to the city.