Hong Kong Exchange and Clearing should consider fund platform
While brokers have strongly demand the Hong Kong stock exchange launch a platform to trade fund products, that is obviously not a priority for the local bourse.
In fact, the exchange should really consider this new platform in light of the strong growth of the fund industry in the city.
Hong Kong Securities Association gave the proposal about half a year ago for the stock exchange to introduce a platform for investors to subscribe and trade fund products like stocks. The investors can trade the fund products with the 500 stockbrokers in the city.
This, according to stock brokers, is a win-win as brokers can get extra commission income while investors have a new channel to buy fund products.
Data from the Securities and Futures Commission showed 78 per cent of the fund products are sold through banks, while brokers now only represent 3 per cent and the rest is via internet and direct sales by fund houses.
The SFC chairman Carlson Tong Ka-shing late last year also voiced support to such an idea as a way to expand the local fund industry.
However, when Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia presented the three year strategic plan for the exchange last month, we did not see him put this item on the list.
Instead, he placed a lot of emphasis on the IPO connect with the mainland bourse and the expansion of the commodities market.
Some insiders told the author of this column that the exchange considers it costly to set up such a fund trading platform if there is not a lot of trading and they also feel many investors would just buy a fund and keep them for the long term.
The exchange however may miss a good opportunity as the Hong Kong Investment Fund Association showed there have been strong interest in buying mutual fund products in recent years.
Despite of dropping five per cent year on year due to the summer stock market rout, the amount of mutual fund gross sales still reached US$65.2 billion in the first 10 months of last year. Those sales had expanded in the three preceding years.
HKEx has been keen on promoting commodities but the six metal contracts they have launched have seen few or no trading at all.
The lead and tin contract had zero trading last month. The nickel mini futures on average only has three contracts per day, aluminium futures on average has seven contracts a day, copper futures has 18 contracts trading every day and most contract is zinc futures which has a daily average of 53 contracts.
If such thin turnover of metal contracts is still worth it for the HKEx, why can’t the bourse think of a fund platform which may be more promising.
Can Charles re-think his three year plan?
Since this is the first column in the Year of Monkey, White Collar wishes all readers Kung Hey Fat Choy!
