The Stock Exchange of Hong Kong hopes to build an alliance with Shanghai and Shenzhen to create a single mainland market, according to Hong Kong Exchanges and Clearing chairman Charles Lee Yeh-kwong. A single entity was needed to enable the mainland's exchanges to better compete against strengthening North American and European markets, Mr Lee said. 'I think it will be a long time before we can create a single China stock market,' he said. 'However, it is the right time to consider such a long-term plan.' Mr Lee also said he had proposed to the New York Stock Exchange that the creation of an alliance between Hong Kong, New York and London would be an ideal first stage to Wall Street's plan to form a nine-market global grouping. 'It will be easier for three stock exchanges to reach agreement on forming a single trading platform than nine.' Mr Lee said New York wanted to include Hong Kong, Tokyo and Australia as the Asia-Pacific element of the alliance. He said there were no plans to include Singapore, Hong Kong's main regional rival. It is not clear what other markets New York wants included in the G9 alliance, as it is being called. However, brokers believe Wall Street wants to join with the Nasdaq and Toronto markets in North America, as well as London, Frankfurt and Paris in Europe in addition to the Asian exchanges. On the mainland alliance, Mr Lee said it could be achieved only if the Hong Kong, Shenzhen and Shanghai exchanges formed a single trade platform and clearing system. 'A single trading platform would allow Hong Kong and mainland investors to conduct cross-trading and the exchanges to increase turnover,' he said. Nonetheless, such an ambitious plan would not be easy to achieve, Mr Lee said. The yuan, which was not freely convertible, posed a serious problem, he said. Moreover, foreign investors are allowed to invest only in the B-share market, which trades in US dollars in Shanghai and Hong Kong dollars in Shenzhen. Foreign investors have no access to the yuan only A-share markets in Shanghai and Shenzhen. This situation will make it difficult for the alliance to carry out cross-border trading. In addition, the mainland's securities regulation system is different from the SAR's. Hong Kong will complete its plan to merge its stock exchange and futures exchanges and the three clearing houses next year. The merger will pave the way for Hong Kong to ally itself with the Shenzhen and Shanghai exchanges, Mr Lee said.
