| HONG KONG
HONG KONG Feb 26 With nearly half of its market
value wiped out in the last three years, Hong Kong's stock
exchange is hoping that a slate of new initiatives will give it
a much needed boost.
Hong Kong Exchanges & Clearing Ltd, as it's
formally known, has pinned hopes on a HK$3 billion ($386
million) technology upgrade, a push into yuan-denominated
products and its $2.2 billion purchase of the London Metals
Exchange in 2012.
A glimpse into its progress and future plans will come on
Wednesday when the exchange reports 2013 results, with analysts
expecting a profit of HK$4.7 billion.
The HKEx is betting on a bigger menu of yuan-denominated
products in bonds, commodities and equities as Hong Kong strives
to cement its position as the world's biggest offshore yuan hub.
Last week it listed the first Exchange Traded Fund, or ETF,
outside China that tracks the onshore bond market.
A resurgence in initial public offerings late last year has
boosted listing fees, though HKEx executives know that IPO
revenues alone are not the answer to its turnaround.
Indeed, the HKEx is urgently trying to tap new areas of
growth and diversify away from the traditional areas of cash
equity trading and equity offerings by Chinese companies.
Otherwise, the HKEx stands to lose ground as China moves
towards its goal of full convertibility of the yuan, which would
allow foreign investors to trade on mainland exchanges in
Shanghai and Shenzhen, unfettered by quotas or other
"If China opens up too fast, or if China finds that Hong
Kong can't deliver the things it wants, then we will lose our
edge," chief executive Charles Li told the audience at the Asia
Financial Forum in Hong Kong last month.
With a market capitalization of around $18 billion, Hong
Kong's stock exchange has fallen to fourth place from first
among publicly-listed international bourses, due in part to a
drop in IPO volumes since 2011.
HKEx's $6 billion to $7 billion of daily turnover now pales
in comparison to New York, Tokyo and mainland China exchanges,
where daily turnover at each is at least four times higher.
Meanwhile, rival exchanges such as the CME Group Ltd
, Intercontinental Exchange and NYSE Euronext
are encroaching on the HKEx's turf, offering their own
commodity and yuan-related products.
CME, for example, sees an average daily trading volume for
its yuan-denominated forex and bond products of $40 billion.
That compares to a daily average in January of $774 million for
HKEx's offshore yuan futures, according to company data.
Regulatory hurdles also loom.
HKEx's new data center is aimed at improving its
high-frequency trading offering, at a time when Hong Kong
regulators have denounced such trading as potentially
disruptive. Last year, regulators rejected Alibaba Holdings
attempt to launch a roughly $15 billion Hong Kong IPO.
(Additional reporting by Lawrence White; Editing by Michael
Flaherty and Simon Cameron-Moore)