All eyes on commodities trading

The first LME Week outside London will showcase ambitions for the sector, enabling HK to move on from HKMEx failure, backers say

PUBLISHED : Monday, 17 June, 2013, 12:00am
UPDATED : Monday, 17 June, 2013, 5:20am

Commodities traders from around the world will begin gathering in Hong Kong for the annual "LME Week" on Friday - the first time the London Metal Exchange get-together will be held outside London.

About 1,000 visitors are expected to fly in for the event, including commodity traders, users and producers.

Hong Kong brokers have welcomed the decision to stage the event in the city and say it will increase awareness of the little-known commodities trading here and help offset the impact of the closure of the Hong Kong Mercantile Exchange (HKMEx).

LME Week Asia starts with a workshop for international and local media about how commodities' trading and the LME work. This will be followed by a seminar on June 25 and more workshops on June 26 and 27 for commodities traders, users and producers to exchange views.

Commodities experts from Standard Chartered Bank, Deutsche Bank, Jiangxi Copper, Bank of China, Dalian Commodities Exchange and Zhengzhou Commodities Exchange will attend.

Hong Kong Exchanges & Clearing (HKEx), the local operator of the stock and futures markets, completed a deal to buy the LME in December for £1.39 billion (HK$16.9 billion). Established 136 years ago, the LME is the world's largest metal exchange trading a wide range of commodities, including copper, aluminium and lead. Contract turnover last year was US$14.5 trillion.

The acquisition allowed HKEx to step into commodities trading to capture mainland users who have become the world's largest consumers of many commodities including steel and copper.

The event follows in the wake of the closure of the home-grown commodities exchange, the HKMEx, which was initially set up to trade oil but shifted to gold and silver trading. Thin turnover failed to generate sufficient income to support its operations, however, and last month it surrendered its licence to operate to the Securities and Futures Commission (SFC).

The SFC later found financial irregularities and referred the case to police, who have since arrested seven people and charged four of them.

Haywood Cheung Tak-hay, president of the Chinese Gold and Silver Exchange Society, said the timing of LME Week was good.

"It will bring almost all the big commodity players here. This will allow the Hong Kong government and HKEx to tell the world that we are not affected by the closure of HKMEx. The event can show Hong Kong is still keen to promote commodities trading," he said.

Christopher Cheung Wah-fung, the legislator for the financial services sector, said about 100 local stock brokers would attend LME Week, representing about 25 per cent of brokers in the city.

"It will be an opportunity for local brokers to learn more about the LME operations. Up till now the HKEx has not yet announced how local brokers can trade LME products or how can they join LME as members," he said.

"We hope after all these workshops and events, the HKEx can start with a concrete plan to bring commodities trading business here. It would be good if it would allow local brokers to trade LME products for Hong Kong investors and develop the city as a commodities trading centre."

The HKEx is also seeking a replacement for LME chief executive Martin Abbott, who has resigned.

"It is not a real surprise that Abbott is leaving as that is what usually happens after a merger," a source said. However, he has agreed to stay on until the end of this year.