For Hong Kong Exchanges and Clearing (HKEx), the biggest initiative in 2016 was the launch of Hong Kong-Shenzhen Connect, a trading link designed to give foreign investors greater access to shares listed on the Chinese mainland. Hong Kong-Shenzhen also joined with the Shanghai-Hong Kong Stock Connect, so there are now “four pipes – two going Northbound, with international investors trading Chinese equities, and two more coming Southbound,” Romnesh Lamba, co-head of market development at HKEx, told John Lothian News at FIA Boca 2017.
“Volumes associated with that program have really picked up,” Lamba said. “They are almost triple the levels from last year. That’s a trend we expect to continue.”
The big initiative in 2017 is the launch of HKEx’s fixed income and currency products. In the past three years, HKEx has focused on equities and commodities, but now plans to launch its first interest rate products, starting with the 5-Year China Ministry of Finance Treasury Bond (MOF T-Bond) futures due to launch on April 10. It will be the first onshore Chinese interest rate contract accessible to offshore participants.
Challenges ahead are “in many ways identical to our opportunities,” Lamba said, “meaning our strategy is always about leveraging our trusted partner relationship with China.” As China opens up, the exchange believes there will be more money flowing into all asset classes, as well as more money flowing out. And HKEx wants to be firmly in the middle of those flows. China has a lot of liquidity in its domestic market but only 1 percent of that is international money. Similarly, only 10 to 15 percent of HKEx’s volumes are in Chinese money.
“So we’re optimistic that structurally, we have a large organic opportunity ahead of us,” he said.