HK stock market in venture with Chinese exchanges

[June 28, 2012]  HONG KONG (AP) -- Hong Kong's stock exchange operator said Thursday it's setting up a joint venture with mainland Chinese bourses to develop new products as it seeks to raise competitiveness and strengthen ties with markets in the world's second biggest economy.

Hong Kong Exchanges and Clearing Ltd. said it is teaming up with stock exchanges in Shanghai and the southern boomtown of Shenzhen. Each bourse will invest 100 million Hong Kong dollars ($13 million) in the venture, which will be set up within three months.

The new company will develop a series of benchmark stock indexes covering big Chinese companies listed on the three exchanges. Then it will develop new equity index futures and options based on these indexes for trading on Hong Kong's derivatives market.

Hong Kong is a semiautonomous region of China with its own financial system and currency. There has been little cooperation between stock markets in Hong Kong and mainland China until now.

Thursday's announcement is one of several measures aimed at boosting Hong Kong's economy that come ahead of Chinese President Hu Jintao's visit for weekend ceremonies marking the 15th anniversary of the end of British colonial rule. Earlier Thursday, China's Ministry of Finance said it was issuing 23 billion yuan ($3 billion) in sovereign bonds in Hong Kong. The day before, China's cabinet announced measures to boost yuan trading in Hong Kong and encourage mainland companies to invest abroad with Hong Kong partners.

The new venture between the stock exchanges will help promote the development of China's capital markets and the internationalization of the three exchanges, Hong Kong Exchanges and Clearing said in a statement.

It is the latest step by the stock market operator to shift into new markets and classes of financial products as growth slows from its traditional equities business.

Earlier this month, the company said it would buy the London Metal Exchange, the world's biggest metal trading market, for $2.2 billion.

Chief executive Charles Li has outlined plans to expand into commodities to capitalize on China's voracious appetite for that raw materials that fuel its strong economic growth.

Hong Kong Exchanges has also been trying to promote yuan-denominated listings as China promotes the use of its currency abroad. But activity has been slow, with only one listing so far.

[Associated Press; By KELVIN CHAN]

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