Hong Kong becomes world's largest exchanges operator

Soaring share prices in China have bestowed a stunning market value of $44bn on Hong Kong's equity and derivatives exchange, propelling the Asian bourse way beyond the worth of leading global rivals

A two-thirds appreciation in the share price this month alone of Hong Kong Exchanges and Clearing has been powered by massive trading volumes flowing from China into the territory, which has long been a pre-eminent financial centre in Asia.

Concerns over a slowing Chinese economy have not derailed the current equity bull market, with investors buoyed by cheaper borrowing costs which have ignited margin trading and general speculation into local shares.

A widening gap between the value of share prices for Chinese companies quoted in Shanghai and in Hong Kong has fuelled the rally, significantly boosting trading volumes and the share price for the HKEx.

The current equity valuation of HKEx means the exchange has displaced the US's CME Group with a market capitalisation of $31bn, from its long-held position as the world's largest exchanges operator in the past month.

The Hong Kong bourse also outstrips fellow US derivatives exchange operator Intercontinental Exchange which owns the New York Stock Exchange and has a market valuation of $25bn. The London Stock Exchange Group is worth $13bn and Deutsche Borse $16bn (see chart below).

Turnover, which drives most of HKEx's earnings, topped $37bn last Thursday, more than a day's trading in London, Paris and Frankfurt combined. Share volumes on the Hong Kong market have spiked in the past week following a move by the Chinese authorities to give mutual funds access via Stock Connect.

That increase in activity has raised expectations for the earnings performance of HKEx and the Hang Seng index is now up 12 per cent since the start of the month, a rally that shows little sign of concluding.

Such has been its success in recent weeks that HKEx executives are already talking about boosting the daily quota to allow more Chinese money to flow in.

Separately on Monday, HKEx also said it had established a new mainland division to reflect the growing importance of China to its business.

The new division is co-headed by Mao Zhirong, who headed the mainland development team before it became part of the new division, and Li Gang, who had been a senior adviser to HKEx for two years. Both will report to Charles Li, HKEx chief executive.

Hong Kong's benchmark index closed above 28,000 points for the first time since 2007 on Monday. At that time, China's GDP growth had hit 14.2 per cent, whereas currently, data set for release on Wednesday are due to show GDP growth of 7 per cent for the fourth quarter of last year.

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