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HKEX’s acquisition means it is among Guangzhou Futures Exchange’s founding shareholders. Photo: Martin Chan

HKEX makes first offshore investment in China market with 7 per cent stake in Guangzhou Futures Exchange

  • The deal is the first time Beijing has allowed a non mainland Chinese investor to buy a stake in a domestic exchange
  • Beijing’s approval shows commitment to opening up capital markets to world: analyst

Bourse operator Hong Kong Exchanges and Clearing (HKEX) said on Friday it has acquired a 7 per cent stake in the newly created Guangzhou Futures Exchange.

The 210 million yuan (US$32.45 million) deal is the first time Beijing has allowed a non mainland Chinese investor to buy a stake in a domestic exchange. The acquisition came just two weeks after the futures exchange got the go-ahead from the China Securities Regulatory Commission, and the bourse operator is among Guangzhou Futures Exchange’s founding shareholders.

The new exchange will focus on green and other climate-related futures products, according to CSRC officials. Mainland Chinese media reported that the potential products could include carbon emissions options and futures.
“We are already champions of sustainable finance within the Greater Bay Area and we now look forward to extending our promotion of green and low-carbon markets through the commercialisation and international development of the Guangzhou Futures Exchange in the region,” said Calvin Tai, the interim chief executive of HKEX.

The Guangzhou Futures Exchange is a major project under Beijing’s bay area project. Friday’s deal will further integrate the capital markets in Hong Kong and Guangzhou, two biggest cities in the development zone, brokers said.

“Beijing’s approval of HKEX holding a stake in the Guangzhou Futures Exchange shows the country’s commitment to opening up its capital markets to the world,” said Gordon Tsui Luen-on, chairman of the Hong Kong Securities Association. “It is a positive move, as HKEX owns a futures exchange that has been operating for more than 40 years. It can share a lot of experience with the Guangzhou exchange. The investment will further integrate Hong Kong into the Greater Bay Area.”

HKEX has operated a futures exchange for more than 40 years. Photo: Sam Tsang
HKEX, which also operates the London Metal Exchange, last year launched Stage, a portal allowing companies to promote their green bonds as well as other investment products that comply with environmental, social and governance standards, without any charges.

Shares of HKEX trade on the city’s exchange, and had a market value of almost US$85 billion at Friday’s close, making the bourse operator the world’s largest by capitalisation. The total value of the city’s stock market rose to US$7.08 trillion at the end of Thursday, making Hong Kong the world’s third-largest equity market behind the United States and mainland China.

As part of its blueprint for the development zone, Beijing will also set up a Nasdaq-like stock exchange in Macau to help start-ups and growth companies raise capital. Tsui said HKEX might possibly acquire a minority stake in the Macau bourse as well. “Hong Kong has run a stock exchange for 130 years and can provide a lot of support to the newly set up exchange in Macau,” he said.

The Guangzhou and Macau bourses could add to the US$12.2 trillion in combined market capitalisation, as of Thursday, of the exchanges in Hong Kong and Shenzhen, where 4,956 listed companies’ shares change hands, making the markets Asia’s largest pool of capital.

“We are very excited to be a part of this important initiative to develop the Guangzhou Futures Exchange. This investment supports our China Anchored strategy, providing HKEX with the valuable opportunity to help build and promote the development of China’s derivatives market, alongside our mainland partners,” HKEX’s Tai said.

The deal has high symbolic value since it marks the first time that an overseas investor is being allowed to own a stake in a mainland securities exchange, said Wang Feng, chairman of Shanghai-based financial services company Ye Lang Capital. “Bringing in HKEX as an investor, the regulators are obviously looking to strengthen connections with Hong Kong’s financial markets, to conduct further opening up of the mainland ones.”

The Guangzhou exchange’s other shareholders include Ping An Insurance (Group) and China’s other futures exchanges, among others, according to mainland media reports.

Additional reporting by Daniel Ren

This article appeared in the South China Morning Post print edition as: HKEX buys 7pc stake in new Guangzhou exchange