US-dollar trading fails as guarantee of high liquidity
Trading shares in US dollars on the proposed Growth Enterprise Market (GEM) will not necessarily boost liquidity, according to a partner at a leading accounting firm.
'Take the Jardine [Matheson] group as an example,' Arthur Andersen partner Kennedy Liu Tat-yin said.
'Since the shares moved to Singapore from Hong Kong and have been traded in US dollars there, trading liquidity has decreased.
'It is also not easy for retail investors in general to open a current account in US dollars to trade shares in US dollars in Hong Kong. That may become an obstacle to generating liquidity in the new market.' Some bankers echoed Mr Liu's comments.
'Local banks need to settle their US-dollar transactions in New York through United States correspondent banks, so they have to charge quite a fee to clients for a US current account,' Dah Sing Bank general manager Gary Wang said.
However, the stock exchange said there was a need to trade in US dollars. 'Some issuers want to be capitalised in US dollars,' exchange senior executive director Lawrence Fok Kwong-man said.
'In fact, more than 70 companies [on the main board market] do their accounting in US dollars right now.' The stock exchange is believed to have decided that companies listed on the GEM should be mainly traded in US dollars as a means of increasing investor participation in the new market.
Sources believe several parties in the financial industry, including Citibank Hong Kong, are in talks with the exchange to set up a US dollar clearing system in Hong Kong for the market.
Mr Wang said whether it would be easier for local investors to trade in US dollars still depended on there being sufficient demand for the service, even with a local US dollar clearing system.
Meanwhile, GEM working group chairman Lo Ka-shui said yesterday about 30 mainland companies had shown interest in registering to list on the market, while an equal number of local companies were also in the queue.
