Bohai bourse readies yuan trade in Hong Kong
Tianjin's Bohai Commodity Exchange, the first non-bank organisation on the mainland given permission to conduct cross-border yuan business, introduced its online platform to Hong Kong companies yesterday as its first step in going global.
Exchange chairman Yan Dongsheng said the platform would allow Hong Kong and international investors to conduct yuan settlement and trade up to 70 products ranging from crude oil to apples. Two newly launched international products are iron ore and rubber.
"We chose Hong Kong as our first location to expand outside the mainland because Hong Kong is the largest offshore yuan trading centre," he said. "It has an active capital market and a sound banking system. It is also a big exporter so has a huge potential for commodity trading."
He said the bourse would not set up an office in Hong Kong but would team with partners such as Bank of China (Hong Kong), the clearing bank for yuan business in the city, for client referrals. Other investment banks and trading firms could also apply to join the bourse to trade on its online platform.
Yan presented his exchange to 200 traders from Hong Kong, Malaysia, Indonesia and Thailand at BOCHK's headquarters yesterday. He also signed agreements with some industry players to introduce trade in new Chinese medicine products and bird's nest.
All international trades can be settled in yuan.
Yan said the bourse would not be a competitor to the London Metal Exchange, which Hong Kong Exchanges and Clearing bought a year ago to expand into commodity trading. The LME plans to introduce yuan commodity products in Hong Kong next year.
"There will be no competition," Yan said. "The Bohai Commodity Exchange only provides spot trading while the LME trades futures products. We provide different services for industrial players and investors."
Established in 2009, the Bohai exchange now sees 20 billion yuan (HK$25.4 billion) in trading every day.
Hong Kong has a poor record in commodities trading. The two-year-old Hong Kong Mercantile Exchange, which traded gold and silver contracts, saw little trading and handed its licence back to the Securities and Futures Commission in May.
"Some operators do not understand what commodity customers need," Yan said. "The Bohai exchange is close to our customers as China is the world's largest consumer of various types of resources and materials."
Bank of China deputy general manager James Jiang Xu said his bank would support the Bohai bourse in its yuan business and refer international clients to it. "The Bohai bourse is trading in yuan, which would be useful to [those] who trade on the mainland," he said.