China and HK bourses form venture to offer new products
29 Jun 2012
Hong Kong Exchanges and Clearing Ltd. and its counterparts in mainland China have agreed to form a joint venture to develop index-linked and equity derivatives products to boost competitiveness.
Hong Kong's stock exchange operator, the Shanghai Stock Exchange and Shenzhen Stock Exchange, will each contribute HK$100m ($13m) as initial paid-up capital for the new company, which will be set up within three months, according to a HK Exchange statement.
The new company will develop a series of benchmark stock indexes covering major Chinese companies listed on the three exchanges. The new equity index futures and options based on these indices will be traded on the HKEx's derivatives market.
This venture is a part of package of policies China is announcing to promote the further development of Hong Kong, especially as an offshore yuan centre.
The Chinese finance ministry is issuing RMB23bn yuan ($3.6bn) in sovereign bonds in Hong Kong, of which $2bn has been set aside for the first time for central banks outside China. The institutional tranche of this year's dim sum bond issue will total RMB15.5bn, and the rest will be offered to retail investors.
The foreign central banks had initiated their interests to China about holding RMB as part of their reserve currency, Vice Finance Minister Li Yong told reporters in Hong Kong. "China's economy will continue to grow, as will Hong Kong's offering of offshore yuan products. I am positive that more foreign central banks will pursue Chinese sovereign bonds."
The dim sum bonds will also be listed on the Hong Kong exchange partly to meet the governance requirement of some pension funds and insurance companies, Li said. "We came up with this idea after some of the pensions and insurance companies told us they can only invest in exchange listed financial products."
China also announced plans to launch a trial program allowing yuan conversion the Qianhai Bay area in Shenzhen. The financial zone will be jointly developed by Hong Kong and Shenzhen, according to a government statement.
The country is expected to announce more details of the incentives and preferential policies for the Qianhai zone during Chinese President Hu Jintao's visit to Hong Kong, starting June 29. Hu will be in Hong Kong to mark the 15th anniversary of the city's return to China.
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Author: Iain Mills