New market-makers sought to lift turnover
Hong Kong Exchanges and Clearing (HKEx) plans to introduce more market-makers for locally listed Nasdaq stocks, attempting to turn around low liquidity.
Chief executive Kwong Ki-chi yesterday said the turnover of the seven Nasdaq stocks was lower than expected and the exchange was working on measures to improve the situation.
'We have so far been approaching some other firms [than the three existing makers] to see their interests [in market-making],' Mr Kwong said.
The exchange may introduce one or two market-makers to help stir up the liquidity, he said.
ING Baring, Morgan Stanley Dean Witter and Timber Hill are the market-makers, giving quotes on both buy and sell orders and maintaining the spreads between the two sides at a reasonable range.
However, trading among the seven - Microsoft Corp, Intel Corp, Cisco Systems, Dell Computer Corp and Applied Materials, Amgen and Starbucks Corp - has been slow since their debut in the local market on May 29.
Yesterday, for example, their combined turnover was about HK$1 million, against the total market turnover of HK$15.31 billion. Dell and Intel did not trade at all.
The spreads between buying and selling of the stocks were also large. Starbucks, for example, had a spread of up to HK$8 yesterday, compared with its closing price of HK$295. Larger spreads cost investors more in trading.
Mr Kwong said a reason for low volume might be that local investors had yet to get accustomed to trading the stocks.
David Friedland, managing director at market-maker Timber Hill, echoed this view.
He said local retail investors were not accustomed to trading in such high-priced stocks.
Prices of the seven roughly range from HK$300 to HK$1,100 per share. Hutchison Whampoa, one of the most expensive primarily listed local shares, closed at HK$115.50 yesterday.
Mr Friedland hoped the launch of the exchange's third generation Automated Order Matching and Execution System, or AMS/3, could help improve the cold response.
'I think AMS3 will be a big help because after its launch foreign institutions may take more interest in the local market,' Mr Friedland said.
He said the system could make processing of overnight trading in Hong Kong much easier for foreign investors, especially in the United States.
AMS3, which allows investors direct Internet access to the local stock trading system, is scheduled to be launched by the third quarter.
Meanwhile, Mr Kwong yesterday confirmed Principal Assistant Secretary for Financial Services Bryan Chan would join the exchange as a senior executive.
He refused to say whether the post was advertised, only saying the exchange had no obligation to disclose its appointments procedure since it was not a governmental body but a commercial institution.
Brokers were concerned about the increasing recruitment of government officials fostering a bureaucratic culture which could undermine the HKEx's administrative efficiency.
