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HKEX to unveil mainland commodity trading platform this week
[HONG KONG] Exchange operator Hong Kong Exchanges and Clearing is set to unveil its Qianhai commodity trading platform this week in a landmark move that it hopes will firmly establish its presence in mainland China.
As the metals industry meets for LMEWeek Asia in the Chinese territory, the focus will be on the Hong Kong bourse's latest attempt to take on China's home-grown exchanges in Shanghai, Dalian and Shenzhen.
The owner of the London Metal Exchange (LME) will host a visit on Thursday to its spot-trading platform in Qianhai, just 50 kilometres from Hong Kong, where it hopes to replicate the LME's success.
The aim is to connect Qianhai with the LME, luring customers with opportunities to be active in both the mainland's domestic markets and international markets.
For years the Hong Kong bourse has tried to build up a mainland business, banking on its location as the perfect meeting point for China's mainland and global commodities traders, a strategy it bankrolled with a $2.2 billion buyout of the London bourse back in 2012.
But China's regulators have shown less enthusiasm, concerned that taking in a foreign bourse too early could derail the development of its own commodity bourses and influence pricing.
HKEX CEO Charles Li is hoping the Qianhai platform will attract an industrial base to use its commodity contracts, which will be backed by warehousing and logistics chains with a view to create prices that reflect the physical market.
The LME has set up a new warehousing certification system to track metal and cut fraud, after several financing scandals rocked the industry in recent years. LMEShield will have a one-year pilot programme in China.
But industry insiders are skeptical that the exchange will offer them something that they don't already have in a market where investors are turning away from commodities in favour of more tailored investment products.
"They have to define what makes it relevant," said John Browning, managing director of Hong Kong-based broker BANDS Financial. "If there is a vacuum that this exchange is going to fill, why hasn't it been filled before?"
LMEWeek Asia will also mark Matthew Chamberlain's debut as LME CEO, after he took the top job last month, when he also set down a roadmap to reverse the LME's falling liquidity.
The week is also expected to have a focus on gold. The LME will launch two separate London and Hong Kong gold contracts over June and July to coincide with the 20th anniversary of the British handover of Hong Kong back to China, Mr Li said earlier this year.