The demise of the Hong Kong Mercantile Exchange (HKMEx) would not affect the city's development of commodities trading, according to the Secretary for Financial Services and the Treasury Chan Ka-keung.
"The closure of the HKMEx is just a ripple. It will not have any long-term negative impact on the local financial market's development of commodities trading," Chan said yesterday.
The exchange, which traded gold and silver contracts, was founded and chaired by former Executive Council member Barry Cheung Chun-yuen. The two-year-old exchange failed to generate sufficient income and handed back its licence to the Securities and Futures Commission last month.
A few days later, the SFC alerted the police commercial crime bureau to suspected serious financial irregularities at the HKMEx. Police subsequently arrested six people and charged three. Cheung has resigned from all his public duties.
The failure was seen by analysts as a sign that the city has little hope of developing into a commodities trading centre, but Chan rejected such claims.
"It is true that many international investors are now trading commodities products in either London or Chicago. But this does not means Hong Kong has no hope to develop commodities trading," Chan said.
Hong Kong Exchanges and Clearing , the operator of local stock and futures markets, in December completed a deal to spend £1.39 billion (HK$16.56 billion) to acquire the London Metal Exchange, the world's largest metal exchange, which could be a platform for the city to develop commodities trading.
In addition, he said the internationalisation of the yuan meant Hong Kong had a chance to develop yuan-denominated commodities products trading in the city.