Brokers urge systems upgrade for HKEx
Stock exchange needs better trading systems and cut to stamp duty to compete with growing international rivals, say brokers and investors
Hong Kong Exchanges and Clearing needs to upgrade its systems and introduce commodities trading in order to compete with rival exchanges in Shanghai and elsewhere in the world, local brokers and international investors said.
They said the city's stock exchange faced a growing challenge to its status as a key regional player because its former flagship products, so-called H shares, had lost their lustre after their poor performance.
H shares, which are shares of mainland companies traded on the market, mark their 20th year of listing in Hong Kong today. The first to list, on July 15, 1993, was Tsingtao Brewery, and since then a further 175 mainland-incorporated companies have listed on the market.
Brett McGonegal, the chief executive of Reorient Financial Markets, said international investors invested in H shares as a way to invest in China.
"But the future will be more challenging for Hong Kong, because China has started to open up its market to the West. If international investors have more direct access to mainland markets, there will be less need for them to invest through Hong Kong," McGonegal said.
In addition, the local market was suffering from reduced liquidity, or turnover of shares, and as one of the few markets that levied a stamp duty on share transactions, the government had discouraged international investors from using computer programs to trade.
"The liquidity pool is proving to lack depth, and this means large fund houses and investors have to weigh liquidity constraints when considering investing in the Hong Kong market," McGonegal said.