Hong Kong’s stock exchange operator HKEX topples Chicago’s CME as world’s most valuable as US-China rift brings in more listings
- Hong Kong Exchanges and Clearing (HKEX) overtook CME Group as the largest bourse owner by market value as CEO search continues
- Its share price has surged through the final week of 2020 into the new year on hopes for more secondary listings of US-listed Chinese tech firms
The bourse operator’s shares rose 3.4 per cent to HK$457 on Tuesday, valuing it at HK$579.4 billion (US$74.7 billion), according to Bloomberg data. CME, the owner of the world’s most diverse derivative exchange, has a market cap of US$64 billion, and Atlanta, Georgia-based Intercontinental Exchange or ICE is valued at US$63.4 billion.
The offers extra challenges to the new CEO as tensions between Beijing and Washington spilled into the finance arena. The HKEX also needs to infuse new ideas into its three-year strategic plan by widening its range of products and embracing more technology in its stock listing processes.
“The prospects for HKEX are quite positive, especially for medium- to long-term investors,” said Stanley Chan, director of research at Emperor Securities. “In terms of the number of IPOs and market value as a whole, the HKEX will only grow bigger. Its growing market valuation and international appeal will attract more foreign funds.”
Li orchestrated the overhaul of Hong Kong’s listing rules that has wooed Chinese unicorns, and masterminded the Stock Connect that integrated the city’s financial market more with the mainland’s. During his tenure, HKEX jumped almost threefold in market cap.
For now, the exchange is in the temporary charge of Calvin Tai, the exchange’s co-president and chief operating officer, while the search for a permanent replacement continues while Li stays on for a while as board advisor.
In his first week at the helm, Tai has witnessed wild swings in stock prices of Chinese telecom giants over US delisting risks. More of the same could be in store in the months ahead.
Continuing geopolitical tensions and associated regulatory challenges would also be key drivers to HKEX benefiting from the major secondary listings of US-listed Chinese firms, according to Christopher Ma, a consultant at law firm Simmons & Simmons Hong Kong.
“An overriding priority for the next CEO would be to continue to leverage on technology to continue shaping the landscape for HKEX to become more competitive and efficient,” he said. That will help Hong Kong remain as the “go-to international financial market” for listing and investment, he added.
A bullish call among Wall Street and European investment banks on Hong Kong stock market may add further impetus to HKEX’s bull run, with Morgan Stanley, Goldman Sachs and Credit Suisse all predicting that the Hang Seng Index will end 2021 higher.
The 50-member benchmark fell 3.4 per cent in 2020, a laggard among the world’s major stock markets. The S&P 500 index rose 16 per cent last year and the Shanghai Composite Index gained almost 14 per cent.
The under-performance in 2020 was due to the large representation of financial and property stocks in the benchmark, which are more vulnerable to economic damage caused by the Covid-19 pandemic, according to Caroline Maurer, head of China and Hong Kong equities at HSBC Global Asset Management. They account for 44 per cent weighting in the benchmark.
“With vaccinations coming into effect, we are going to see more normalised global economic activities,” she said. “That should benefit Hong Kong financials, as well as Hong Kong property [companies] for instance, bringing some tourism and financial activities back [to the city].”
