Upload
liang
View
32
Download
0
Tags:
Embed Size (px)
DESCRIPTION
THE EVOLVING ROLE OF HONG KONG AS A SECURITIES MARKET FOR THE MAINLAND. Paul M Y Chow, Chief Executive Hong Kong Exchanges and Clearing Limited at University of Hong Kong luncheon on 12 March 2007. AGENDAPage. The evolving role of Hong Kong as a securities market for the Mainland. - PowerPoint PPT Presentation
Citation preview
Paul M Y Chow, Chief Executive
Hong Kong Exchanges and Clearing Limited
at University of Hong Kong luncheon on 12 March 2007
THE EVOLVING ROLE OF HONG KONG AS A SECURITIES MARKET FOR THE MAINLAND
2
AGENDA Page
1. Development of Hong Kong’s Mainland role 3
2. Current status 12
3. Challenges 14
4. Outlook 21
The evolving role of Hong Kong as a securities market for the Mainland
3
1. DEVELOPMENT OF HONG KONG’S MAINLAND ROLE
Since the 1980s, the Hong Kong securities market has played a key role as a bridge between China and the world
Since 1993, US$190 billion of equity capital has been raised by Mainland enterprises listed in Hong Kong (being 55% of total)
Many HK listed companies opened manufacturing operations in Pearl River Delta
HK- or foreign-incorporated China enterprises listed in HK as Red Chips
1980s 1993
H-shares launched
Some H-shares and red chips dually listed on HK and overseas markets
2000
Non H-share Mainland private enterprises listed
Very large Mainland enterprises listed
Mostly British hongs, utility companies & property companies
1960-80s 2005
Promote listing of foreign-controlled companies with Mainland operations
Listings of Mainland banks and insurance companies
2006
A & H shares simultaneously listed in the Mainland and Hong Kong
The evolving role of Hong Kong as a securities market for the Mainland
4
Equity IPO funds raised by Mainland enterprises in Hong Kong (1993 – 2006)
Source: HKEx statistics
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
304
151
77
5140
20
100
71
3 7104119
31%
66%
44%
33%
87%
58%
42%
87%
75%
77%
77%
79%
91% 91%
0
50
100
150
200
250
300
350
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
HK$ bn
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Total IPOs by Mainland enterprises % of all IPOs
5
Number of listed Mainland enterprises in Hong Kong (1993-2006)
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
3855 58
69
101112
124142
168
214
249
304
335
367
0
50
100
150
200
250
300
350
400
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
No.
of
Lis
ted
Mai
nlan
d E
nter
pris
es
Source: HKEx statistics
6
The 10 largest IPOs in Hong Kong since 1993 have all been by Mainland enterprises
Ranking CompanyCapital raised
(HK$bn)Date of listing
1. Industrial and Commercial Bank of China Ltd. –H shares 125.0 27/10/2006
2. Bank of China Ltd. – H Shares 86.7 01/06/2006
3. China Construction Bank Corporation – H Shares 71.6 27/10/2005
4. China Unicom Ltd. 43.6 22/06/2000
5. China Mobile Ltd. 32.7 23/10/1997
6. China Life Insurance Co. Ltd. – H Shares 26.7 18/12/2003
7. China Petroleum & Chemical Corporation – H Shares 26.7 19/10/2000
8. China Shenhua Energy Co. Ltd. – H Shares 25.5 15/06/2005
9. PetroChina Co. Ltd. – H Shares 22.3 07/04/2000
10. China Merchants Bank Co. Ltd. – H Shares 20.7 22/09/2006
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
Source: HKEx statistics
7
Denotes companies with Mainland China interests
The growing Mainland dimension is illustrated by changes in our top 15 companies by capitalisation1973
Hongkong Bank
HK Land
Jardine Matheson
Hutchison Intern’lE.A. Navigation
New World Dev.
Wharf
China Light
Wheelock Marden
Taikoo Swire
HK Telephone
HK Electric
Hang Seng Bank
Whampoa Dock
HK & Shanghai Hotels
1983
Hongkong Bank
Hang Seng Bank
China Light
Hutchison Whampoa
HK Electric
HK Land
Wharf & Godown
Swire Pacific
Jardine Matheson
General Oriental
HK Telephone
Swire Properties
Cheung Kong
SHK Properties
New World Dev.
1993
HSBC
HK Telecom
SHK Properties
Hang Seng Bank
Hutchison Whampoa
China Light
Cheung Kong
Swire Pacific
Henderson Land
Wharf
HK Land
HK Electric
New World Dev.
Jardine Matheson
CITIC
2003
HSBC
China Mobile
Hutchison Wham.
Hang Seng Bank
Cheung Kong
Standard Chartered
SHK Properties
CNOOC
BOC Hong Kong
China Light
China Unicom
HK Electric
HK & China Gas
Swire Pacific
MTR
2006
HSBC
China Mobile
China Construction Bank
ICBC
Hutchison Whampoa
Bank of China
CNOOC
Standard Chartered
PetroChina
BOC Hong Kong
SHK Properties
Cheung Kong
Bank of Communications
Hang Seng Bank
China Life
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
Source: HKEx
8
Period-end market capitalisation of Mainland enterprises (Main Board & GEM) (1993 – 2006)
Mainland enterprises account for half of Hong Kong’s market capitalisation.
128295
522 373
1,0051,309
1,049 982
1,6802,020
6,714
144 105
3,192
(367)(335)(304)(249)(214)(168)(142)(124)(112)(71)(60)(57) (40) (101)
5% 5% 5%
9%
16%14%
21%
27% 27% 27%
30% 30%
50%
39%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
HK$ bn
-5%
5%
15%
25%
35%
45%
55%
Market capitalisation of China-related stocks (H shares,red chips and non-H-share private enterprises)% of market total
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
Source: HKEx statistics
9
Total annual turnover of Mainland enterprises and their contribution to the overall Hong Kong market turnover (1993-2006)*
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
*Excluding Derivative Warrants*Excluding Derivative Warrants
Source: HKEx statistics
122 92 63161
1344
444 461
866 787
499
1052
1665 1657
3879
11%9% 8%
12%
38%
28%26%
29%
42%
33%
46%49%
46%
60%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Tur
nove
r (H
K$
bn)
0%
10%
20%
30%
40%
50%
60%
70%
Turnover of Mainland enterprises Contribution to total market turnover
10
2005
• FTSE / Xinhua China 25 futures and options launched
2003
• H-share Index futures launched
2004
• H-share Index options launched
• iShares FTSE/ Xinhua A50 China Tracker launched
1994
• Stock options, futures & warrants for individual Mainland enterprises developed
2007
• Hang Seng China H-Financials Index futures to be launched
• RMB futures to be launched
• Derivative warrants with iShares FTSE/ Xinhua A50 China Tracker as underlying launched in March 2007
• Position limits of H-share Index futures and options to be increased
Since the 1994, HKEx has broadened the range of Mainland related product offerings
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
Source: HKEx
502 461 488 528 649 572 1,198 1,562 1,256 1,623520339
419
341
205
38
277
222
92109
352
62
193
141
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Q1 0
4
Q2 0
4
Q3 0
4
Q4 0
4
Q1 0
5
Q2 0
5
Q3 0
5
Q4 0
5
Q1 0
6
Q2 0
6
Q3 0
6
Q4 0
6
Turn
over
volu
me
('000 c
ontr
acts
)
0
50
100
150
200
250
300
350
400
450
Op
en i
nte
rest
('0
00
co
ntr
acts
)
Aggregate volume
Aggregate open interest
11
Quarterly volume and quarter-end open interest of H-shares Index futures and options* (2004 – 2006) (Number of contracts)
* H-shares Index futures were introduced on 8 December 2003 and options were introduced on 14 June 2004.
H-share futures and options are growing in popularity.
The evolving role of Hong Kong as a securities market for the Mainland
1. Development of Hong Kong’s Mainland role
Source: HKEx statistics
12
Hong Kong provides a full-service equity market
equity fund-raising
trading
futures and options
derivative warrants
Underpinned by international standards and best practices
Hong Kong Listing Rules adopt international standards, e.g. Corporate Governance Code comparable with London’s
H shares regime requires information disclosure, IAS, reporting, auditing, investor protection
MORC with Mainland authorities helps regulatory coordination
2. CURRENT STATUS OF MAINLAND ROLE
The evolving role of Hong Kong as a securities market for the Mainland
13
Mainland enterprises have contributed substantially to the Hong Kong securities market ( figures as at 31 December 2006)
Unit TotalMainland
enterprises % of total
No. of listed companies Number 1,173 367
No. of newly listed companies Number 62
Main Board Number 56
GEM Number 6
Market capitalisation HK$bn 13,337.7 6,714.5
Total equity funds raised HK$bn 524.5 384.9
Funds raised by IPOs HK$bn 333.9 304.2
Funds raised in secondary market HK$bn 190.7 80.6
Average daily turnover – equity HK$bn 26.2
31%
100%
50%
73%
91%
42%
60%
63%
59%
39
33
6
15.7
The evolving role of Hong Kong as a securities market for the Mainland
2. Current status of Mainland role
Source: HKEx statistics
14
Mainland market revival
Overseas exchange competition
Mainland-Hong Kong market alignment
Hong Kong internal issues
3. CHALLENGES TO HONG KONG’S MAINLAND ROLE
The evolving role of Hong Kong as a securities market for the Mainland
15
Challenge 1: Mainland market revival
The evolving role of Hong Kong as a securities market for the Mainland
3. Challenges to Hong Kong’s Mainland role
• Mainland markets in decline for 4 years
• Share structure reform still in progress
• IPO freeze for a year• Securities firms insolvent or
being restructured
• Mainland stock indices at record highs• Daily turnover exceeds RMB100 billion• Share structure reform largely completed• IPOs resume
– China Life raises RMB28 billion– Ping On Insurance raises RMB38 billion
• Increasing domestic listings• RMB appreciates - HK$ less attractive• Financial futures exchange to commence
operations• Possible development of CDR• Expansion of QFII and QDII
January 2006 January 2007 – onwards
A dramatic change in just one year.
16
Equity funds raised in Mainland China (Shanghai and Shenzhen) compared with Hong Kong (2002 – 2006)
Source: China Securities Regulatory Commission, Shanghai Stock Exchange and Shenzhen Stock Exchange, HKMA statistics, HKEx statistics
31
109 11014
28
36 39
67
0
10
20
30
40
50
60
70
2002 2003 2004 2005 2006
(US$bn)
Mainland China Hong Kong
The evolving role of Hong Kong as a securities market for the Mainland
3. Challenges to Hong Kong’s Mainland role
17
Mainland enterprises are already listed on several overseas exchanges
New York
Nasdaq
London
Singapore
Australia
Tokyo
Toronto This year, the number may increase (Germany, Korea …) However, Hong Kong has the lion’s share of listings, funds raised and turnover Because Hong Kong is perceived as the home market:
Language and culture
Analyst following
Retail investor support
Professional know-how
Time zone and geographical proximity
Challenge 2: Overseas exchange competition
The evolving role of Hong Kong as a securities market for the Mainland
3. Challenges to Hong Kong’s Mainland role
18
Market share of turnover of Mainland enterprises in Hong Kong and US (2006)
Hong Kong has more than 80% of the trading in the two markets.
Hong Kong(81.6%,
HK$1,486 bn)
US(18.4%, HK$335 bn)
The evolving role of Hong Kong as a securities market for the Mainland
3. Challenges to Hong Kong’s Mainland role
Source: HKEx statistics, Reuters
19
Simultaneous A:H share listings highlight differences between Mainland and Hong Kong primary markets, e.g. Pre-prospectus information Bookbuilding method IPO subscription method Suspension and resumption policy
Secondary markets also differ greatly (investor accounts within CSD, settlement period, trading mechanism, trading hours, price / issuer news dissemination, etc.)
The current fundamentally different market models preclude full alignment Capital controls and restrictions on RMB convertibility limit possible alignment Investor within and outside Mainland China not allowed to trade in each other’s
securities market (with the exception of QDII and QFII) Different statutory regulators and regulatory regimes
Challenge 3: Mainland-Hong Kong market alignment
Improved information flow may be the best solution in the medium term.
The evolving role of Hong Kong as a securities market for the Mainland
3. Challenges to Hong Kong’s Mainland role
20
Hong Kong faces internal barriers to market expansion Stamp duty Short selling constraints (under review by SFC) Derivatives position limits (under review by SFC) Stock borrowing and lending constraints New product approval processes
Some of Hong Kong’s “soft” infrastructure needs upgrading Public offering regime (under review by SFC) Companies Ordinance (under review by Companies Registry) Statutory regulation of listed companies (under review: “statutory backing”) IPO mechanism Shareholders protection, shareholding transparency and electronic voting
Corporate governance and enforcement need constant vigilance Difficulty of cross-border regulatory enforcement
The need for wider use of electronic means for collection and dissemination of information
Challenge 4: Hong Kong internal issues
The evolving role of Hong Kong as a securities market for the Mainland
3. Challenges to Hong Kong’s Mainland role
21
Mainland growth is expected to continue, hence: Need for capital Need for risk management Need to absorb corporate governance / management technique to compete
globally Mainland economy is expected to become more and more open
QFII and QDII Gradual liberalisation of RMB
International investors will continue to be interested in the Mainland Capital available Growing business potential But preference for international-standard regulation and corporate governance
Hong Kong will continue to be an attractive channel into the Mainland Freely-convertible currency Free market economic system Open to foreign investors and market participants International network
4. OUTLOOK
The evolving role of Hong Kong as a securities market for the Mainland
HKEx Mission 2004-06
“To operate a world-class marketplace for Hong Kong and Mainland China securities and derivatives products.”
HKEx Mission 2007-09
“To be a leading international marketplace for securities and derivative products focused on Hong Kong, Mainland China and the
rest of Asia.”
The evolving role of Hong Kong as a securities market for the Mainland
23
Mainland Positioning
• China’s international exchange
• Complements Mainland exchanges
• Partners Mainland
Meaning Initiatives
• Overseas issuers (Mainland nexus)• Commodity and emissions-related products• Asian focus• New cash and derivatives products• Address barriers to the securities market
• Service mentality• Cost-effectiveness• Focus on customers
• Collaboration with Mainland authorities and exchanges
• RMB-related products• A&H shares listing and information exchange• Mainland intermediaries and issuers
Business Expansion
Service Enterprise
• Seeking new businesses and customers
• Seeking more business from existing customers
• Service culture• Internal efficiency/automation• Accountability and organisation structure• Compensation linked to service / staff
performance
Themes
The new strategy places emphasis on Hong Kong’s positioning as Mainland’s international financial centre
The evolving role of Hong Kong as a securities market for the Mainland
4. Outlook
24
Ongoing and planned initiatives in 2007:
Formation of the A+H Working Groups with Shanghai Stock Exchange and Shenzhen Stock Exchange
Facilitation of A- and H-share dual listing Harmonise primary and secondary market procedures and information disclosure
Attraction of Mainland intermediaries to be Exchange Participants in Hong Kong
Working more closely with potential issuers who are in the Mainland or with Mainland nexus for listing in Hong Kong
Introduction of RMB futures products in mid-2007
Relaxation of position limits for H-share Index options and futures products
Introduction of real time H-share index movement and prices of H-share index futures on HKEx website
The evolving role of Hong Kong as a securities market for the Mainland
4. Outlook
25
HKEx is committed to building a quality market which will continue to strengthen its role as the securities market for the Mainland
Market Quality
Market Quality
InvestorConfidence
InvestorConfidence
OrderFlow
OrderFlow
Market Liquidity
Market Liquidity
Success of a securities market HKEx focus
Focus on business expansion and provision of quality service
Focus on HK, Mainland China and the rest of Asia
Operate an open, secure, fair, orderly, efficient & transparent marketplace
Goal
Geographical focus
Business focus
The evolving role of Hong Kong as a securities market for the Mainland
4. Outlook
Thank You!
26