Hong Kong Stock Exchange

HKEX chief says uncertainty to linger over global markets during UK’s two-year exit process from EU

PUBLISHED : Tuesday, 28 June, 2016, 9:30pm
UPDATED : Tuesday, 28 June, 2016, 9:30pm

Britain’s decision to exit the European Union may delay some share offering and add to uncertainties lingering over Hong Kong, but it won’t hurt business at the London Metal Exchange, according to Hong Kong Exchanges and Clearing chairman Chow Chung-kong.

Speaking at a ceremony to celebrate the 16th listing anniversary of the exchange, Chow said the pro-Brexit outcome of last Thursday’s vote had set in motion events that would cloud global markets for the foreseeable future.

“Britain will need two years of discussion with the EU on the terms of its leaving. This will bring in a lot of uncertainties to the investment markets worldwide including Hong Kong. Some companies may slow down their development plans or shares offering plans. These will have some impact to Hong Kong,” Chow said.

“However, I do not think the impact would be substantial. The Hong Kong market has operated smoothly during the volatilities of recent days. The liquidity and risk management has worked well. Hong Kong remains the world largest IPO market in the first half of this year,” he said.

HKEX chief executive Charles Li Xiaojia said Brexit would not hurt its subsidiary London Metal Exchange or the plan to link up the commodities markets between Hong Kong and London.

London Metal Exchange trades all contracts in US dollar while its expense is in British pound.

“A falling pound would save money for the LME,” Li said. “The LME has been established for more than 100 years, long before the established of EU. The metal exchange will continue its business as usual even after Britain will leave the EU. The plan to establishing a connection between the commodities markets in Hong Kong and London will also continue, as the LME will focus on expanding in Asia. The Brexit would not affect the plan,” Li said.

Chow said the HKEX has prepared well for the launch of the stock connect plan which will link up the stock markets in Hong Kong and Shenzhen for cross border trading. He added they were awaiting formal approval from Beijing and related regulators.

The HKEX and the Securities and Futures Commission are consulting the market on how to improve the quality of new listings. A currency proposal is to set up two new committees with equal representation from HKEX and the SFC to set listing policies and evaluate complex listing applications.

Chow said the proposals would allow HKEX and SFC to work closely. Li said he does not think tighter regulations would led to fewer new listings, or have a negative impact on HKEX’s income.

“Listing fees represent only a fraction of the exchange’s income. The majority of HKEX income comes from trading and clearing fees. A better quality market will bring in more trading in Hong Kong,” Li said.