Commodities, currency and technology are HKEX’s weapons as it morphs into a global financial marketplace
- HKEX is betting that China will approve a scheme that lets global investors buy and sell ferrous, as well as precious metal contracts on Chinese exchanges via Hong Kong
- Move comes after Hong Kong exchange operator announced plan to add currencies, fixed-income products and other financial derivatives to its offerings
Hong Kong Exchanges and Clearing Limited (HKEX), which rode to the top among global destinations for initial public offerings on a wave of equity sales last year, will add a mixture of new-economy and old-world financial instruments to its arsenal, in its quest to become a global financial marketplace.
The bourse operator is betting that the Chinese government will gives its nod to a cross-border investment channel known as the Connect scheme, which will let global investors buy and sell ferrous, as well as precious metal contracts on Chinese exchanges via Hong Kong.
“Given the increased volatility of [offshore] yuan, it is essential for corporate clients to use hedging tools to mitigate currency risk, [so] yuan derivatives will attract a lot of attention, especially from companies doing business with China,” said Simon Blyth, director and head of EBSHK Forex in Hong Kong. “Hong Kong would be able to capitalise on the robust economic growth in Asia with currency products, which would also help enhance the position of Hong Kong as Asia’s regional financial hub.”
Forays into commodities trading had been on hold since Li first proposed the Commodities Connect in 2014. Instead, the Chinese securities regulator tested the waters with equity investors, first approving a Stock Connect between Shanghai and Hong Kong in 2014, followed by a similar cross-border channel with Shenzhen two years later.