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Enoch Yiu

The securities clearing house will launch Hong Kong's first electronic initial public offering (IPO) within six months.

 The development means investors will be able to apply for new share offers over the telephone instead of having to queue for subscription forms.

 Hongkong Clearing chairman John Chan Cho-chak said all investors who had an account with the Central Clearing and Settlement System (CCASS) would be able to use the service.

 Allotted shares would be transferred to accounts in CCASS, while payments and refunds would be transferred from or to the investor's bank account.

 Investors without a CCASS account could continue to use traditional methods of subscription, Mr Chan said.

 There are 1,860 investors who have opened individual accounts with the central clearing system since the service was launched in May last year.

 Clearing house chief executive Stewart Shing Shin-cheung said investors would be charged a small fee for using the electronic IPO service.

 Mr Chan said Hongkong Clearing would appoint a consultant soon to conduct a comprehensive review of its structure, in a bid to update its technology.

 'We need a new structure to prepare for future growth,' Mr Shing said.

 'The system will be different when it has millions of investors with individual accounts in CCASS.

 'We also need to consider the development of cross-border settlement.'  The clearing house will consider allowing CCASS to settle US dollar-denominated securities to pave the way for the settlement of mainland government bonds listed on the stock exchange.

 Mr Shing said it would launch central stock lending and borrowing this year, firstly through compulsory stock borrowing to cover overdue settlement positions.

 Later it would extend the service to all retail investors.

 The stock exchange this month plans to issue a consultation paper on the listing of Exchange Fund notes.

 Sources said the exchange favoured settlement in T+2 - two days after transaction - in line with stocks.

 However, banks oppose the proposal because at present they have to settle Exchange Fund note trades on the same day (T+0).

 Mr Shing said there would be no problem having different settlement periods for banks and retail investors.

 Reviewing last year, CCASS said it had handled $6.9 billion worth of share transactions, 55 per cent down from $15.5 billion a year earlier.

 At December 31, shares deposited in the CCASS depository amounted to $805 billion, compared with $982 billion a year earlier.

 Settlement efficiency has been increased since CCASS strictly implemented the T+2 rule in September.

 In December, there was a daily average of 12 cases of overdue settlement, resulting in forced buy-ins amounting to $3.5 million.



Service provides ease of business by phone