Hong Kong’s stock exchange and securities regulator yesterday set out details of the three-year strategy to expand equity trading links with China, launch a Bond Connect scheme, set up a commodity trading link with London and expand its range of fixed income and currency products.
Among other plans, the bourse is seeking to partner a global platform to help Chinese investors access international bonds and will launch a scheme through which foreign investors can subscribe to initial public offerings of A-shares.
Hong Kong Exchanges and Clearing (HKEx) said that in the next three years it aimed to double its share of total cash market turnover across Shanghai, Shenzhen and Hong Kong from the current 8-12% range; and double volumes in equity derivatives and fixed income, currency and commodity (FICC) trading.
Morever, the bourse will build new price discovery capabilities, benchmarks and risk management tools for FICC trading to complement its equity and equity derivatives business, said HKEx chairman CK Chow.
With regard to the planned Bond Connect, which will allow cross-border bond trading and settlement between Hong Kong and China, HKEx said its main focus was to facilitate foreign investor access to the mainland interbank market, where most onshore bonds are traded. This is in addition to its plans to improve Chinese investors' access to international bonds. The bourse gave no specific indication of when it might launch the trading link.
Turning to the London-Hong Kong Connect, products from the HKEx-owned London Metal Exchange will initially list in Hong Kong in various forms in the near future, said Charles Li, HKEx chief executive.
An MoU for the London link was signed in October last year, when Chinese president Xi Jinping visited Britain. The scheme will allow Asian investors to trade and clear on the LME through HKEx in the Asian time zone.
HKEx will roll out the link "in the medium to long term", providing access to the LME for individual investors (under QDII-2) and Asian corporates seeking to manage their international metals exposure. China’s central bank approved the QDII-2 scheme late last year to allow wealthy individuals to invest directly in overseas real estate, financial assets and other investments, as reported.
On the equity side, over the next three years HKEx plans to launch Shenzhen Connect, add exchange-traded funds, listed bonds and convertible bonds to the Shanghai and Shenzhen Connect schemes, and allow foreign investors to subscribe to A-share IPOs through its new Primary Equity Connect structure.
The bourse will also expand its derivatives suite to include A-share index futures and options, A-H premium-arbitrage products and sector and international benchmark indexes.
HKEx will also expand its range in precious metal, ferrous and steel products, and work with Chinese commodity exchanges to build a mainland spot commodity trading and financing platform.
As for currency and rates, the exchange plans to launch new benchmark renminbi derivatives, including additional RMB currency pairs, such as Australian dollar, yen and rupee; and introduce China T-bond futures and RMB interest rate products.
It is also mulling launching -- in conjunction with mainland exchanges -- new over-the-counter clearing for products including cross-currency swaps, FX deliverables and OTC FX options.