Next stop for through train may be commodities

HKEx discusses more mainland tie-ups and possible dual structure rule change at meeting

PUBLISHED : Thursday, 17 April, 2014, 1:10am
UPDATED : Thursday, 17 April, 2014, 4:56am

The next stop after the stock "through train" scheme could be commodities as Hong Kong Exchanges and Clearing looks towards tie-ups with mainland futures exchanges after the proposed collaboration with the Shanghai Stock Exchange.

"We'll need to focus on working out the details in establishing our link with the Shanghai Stock Exchange in the next few months. In future, it would be possible for us to have more tie-ups with other mainland exchanges. We are not ruling out similar linkages with the Shenzhen Stock Exchange or futures exchanges across the border," HKEx chairman Chow Chung-kong said after the annual general meeting of the bourse.

Hong Kong and mainland regulators last week announced a through-train scheme to begin in October that will allow investors from the city and the mainland to cross-trade stocks listed in Shanghai and Hong Kong up to a quota of 550 billion yuan (HK$691 billion). The quota has no time frame and Beijing has not said if it will replenish the quota after it runs out.

HKEx and the Shanghai exchange will soon sign the agreement. Under it, mainland investors looking to trade Hong Kong stocks can do so through mainland brokers, who will place the orders at the Shanghai exchange that will then be passed on to the HKEx. Those in Hong Kong investing in mainland stocks will do the reverse.

Mainland investors can trade up to 10.5 billion yuan of Hong Kong stocks a day, or 250 billion yuan in total, while Hong Kong investors can trade up to 13 billion yuan of Shanghai stocks a day, up to 300 billion yuan.

At the HKEx annual general meeting yesterday, some small shareholders asked about the possibility of listing reforms after the exchange lost e-commerce giant Alibaba's initial public offering to the United States.

Alibaba decided to look for another listing venue after it failed to convince the Securities and Futures Commission and the exchange in October to allow it to list with a share structure that would give its founders and the top management more control of the board despite holding minorities stakes. The US allows such dual-class share structures but Hong Kong does not.

The exchange's listing committee is studying the issue while HKEx chief executive Charles Li Xiaojia wrote in his blog about the need to take a fresh look at the issue.

But institutional investors are opposed to any changes in existing rules. A survey by the Asian Corporate Governance Association on Tuesday showed most are against any changes to the listing rules and want the one-share-one-vote principle to stay.

"Before we make any changes to our rules, we would need to have a consultation to gauge the market view," Chow said.