Download Presentation at Economic Summit 2004 by Paul Chow, Chief

2004 and beyond - HKEx’s perspective
Paul Chow
Chief Executive, Hong Kong Exchanges and Clearing Ltd
Presentation at Economic Summit 2004
16 December 2003
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2004 and beyond - HKEx’s perspective
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HKEx has recently completed a strategic planning exercise
To implement the Strategic Plan, we will need the support of
our stakeholders and market players like you.
This presentation highlights the vision, directions and key
strategies of HKEx in the next 3 years
A special focus will be given to our strategies in China
development, market infrastructures and investor protection.
2
Agenda
1.
HKEx’s roles
2.
HKEx’s vision
3.
Direction and strategies
4.
Key initiative - China
5.
Key initiative - Market infrastructures
6.
Key initiative - Investor protection
7.
Conclusion
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1. HKEx’s roles
HKEx is a complex institution with at least 3 distinct roles
Public
organisation
Regulator
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Business
entity
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Maintain an open, secure, fair, orderly and transparent
marketplace contributing to HK’s status as an
international financial centre and premier capital market
for China
Front-line regulator of issuers
Regulator of participants’ compliance with HKEx’s
trading and clearing rules
Operator of market infrastructures
For-profit company
Offer listing, trading, clearing & settlement and
information services
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1. HKEx’s role
(cont’d)
HKEx has many stakeholders
SFC/
Investors Government
Issuers
Data vendors
Investment advisers
/professionals
Suppliers
Shareholders
Staff
Banks
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1. HKEx’s roles
(cont’d)
In pursuing long-term success, HKEx has to balance its
three roles and work closely with its stakeholders. There
are various check and balance measures to avoid conflicts of
interest.
Public
Check &
Balance
Check &
Balance
Regulatory
Business
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Agenda
1.
HKEx’s roles
2.
HKEx’s vision
3.
Direction and strategies
4.
Key initiative - China
5.
Key initiative - Market infrastructures
6.
Key initiative - Investor protection
7.
Conclusion
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2. HKEx’s vision
Goals
General
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Operate a quality market
Geography
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Focus on Mainland China and Hong Kong business
Status
Business
scope
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An independent exchange based in Hong Kong seeking
closer cooperation with China counterparts
Focus on core market operations, including securities
and derivatives trading, clearing, settlement and
depository, information services as well as regulation
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2. HKEx’s vision
Mission statement
The mission of HKEx is to operate a world-class marketplace for Hong
Kong and Mainland China securities and derivatives products. By
offering issuers access to international capital markets and
maintaining an open, secure, fair, orderly, efficient and transparent
marketplace, HKEx contributes to Hong Kong’s status as an
international financial centre and the premier capital market for
China.
By servicing China’s substantial long-term demand for capital and
exchange services in accordance with international standards and
practices, HKEx has the potential to become one of the world’s preeminent exchanges.
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Agenda
1.
HKEx’s roles
2.
HKEx’s vision
3.
Direction and strategies
4.
Key initiative - China
5.
Key initiative - Market infrastructures
6.
Key initiative - Investor protection
7.
Conclusion
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3. Direction & Strategies
Goals
China
positioning
• International gateway for Mainland issuers and (when possible)
investors
• Become a domestic Mainland player in the long run
• A gateway for international players to access China
Global
positioning
• Become one of the world’s larger exchanges with international
standards and practices
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3. Direction & Strategies
(cont’d)
HKEx will base its success on three building blocks
Becoming a
Mainland Partner
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•
•
•
•
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Building a quality
market
Consolidation
•
•
•
•
• Expand China offerings
• Solicit Mainland investors (when permitted)
• Venture into Mainland domestic business
Strengthen regulatory regime
Foster corporate governance culture
Improve market infrastructures
Increase market liquidity
Raise customer satisfaction & investors’ confidence
Improve investor education/information dissemination.
Cost rationalisation
Prioritise projects & streamline internal processes
Strengthen staff team
Strengthen risk management
Time
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Agenda
1.
HKEx’s roles
2.
HKEx’s vision
3.
Direction and strategies
4.
Key initiative - China development
5.
Key initiative - Market infrastructures
6.
Key initiative - Investor protection
7.
Conclusion
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4. Key initiatives - China development
Achievements of the past decade
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The largest offshore listing and trading centre for China stocks
A total of 254 Mainland companies, including H share, red chip and
private enterprises, have been listed on HKEx. Their total market
capitalisation as at Nov 2003 was HK$1,518 billion
Over HK$754 billion was raised by Mainland companies via IPO and
post-listing fund raising
Seven out of eight largest IPO (capital raised > HK$10 bil) were
Mainland companies
Trading of China stocks reached HK$864 billion, representing over
43% of total equity turnover
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4. Key initiatives - China development
(cont’d)
Number of H Shares and Red Chips
110
90
70
50
30
10
-10
Up to Nov
2003 *
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
H Shares
6
15
17
23
39
41
44
50
58
74
89
Red Chips
32
40
41
46
59
63
68
69
69
72
72
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4. Key initiatives - China development
(cont’d)
Turnover of China stocks fluctuates from time to time. This year, H shares and
red chip companies alone have contributed over 40% of total equity turnover.
Their aggregate weighting in Hong Kong’s total market capitalisation is also
large.
Total Equity Turnover
Total Market Capitalisation (Nov 2003)
H shares
5%
(Jan - Nov 2003)
H shares
20%
Red Chips
22%
Others
59%
Red Chips
21%
Others
73%
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4. Key initiatives - China development
(cont’d)
China listing in Hong Kong has created a win-win situation
Benefits for Hong Kong
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Diversifying the portfolio of Hong
Kong listed companies
Improving market width and
depth
Creating a unique selling point to
global player
Developing a sophisticated
domestic pool of China market
experts
Becoming the information hub
for China market
Benefits for Mainland China
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Raising international capital to
support its rapid economic growth
Speeding up enterprise reform,
quality management and corporate
governance in China
Facilitating the development of
China’s capital market
Offering exposure to international
standards and market practices
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4. Key initiatives - China business
(cont’d)
In the next 3 years, HKEx will continue to improve its services to
Mainland and seek new business opportunities there
Our vision
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China, being a very large and
developing economy, has vast long
term demand for capital and
exchange services
Such demand cannot be fully met
domestically
As long as Hong Kong can maintain
its quality advantage in the context
of the Mainland market opening
process, it can grow to a large scale
in both cash and derivatives
markets
Goals
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Continue existing successful
business on issuer side
When regulation permits, Hong
Kong can serve Mainland investors
and intermediaries too
Gradual opening of Mainland market
under WTO and CEPA will provide
opportunities for HKEx’s further
involvement in Mainland business
(in particular, Pearl River Delta
region)
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4. Key initiatives - China business
China
listing
China
products
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Cooperation
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Marketing
& others
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(cont’d)
Attract more major, high quality Mainland enterprises
Enhance listing services to Mainland issuers
Develop China-related products (e.g. H share index
futures/options)
Explore crude oil contract with Shanghai Futures Exchange
Explore cooperation with Shenzhen Stock Exchange
Promote HKEx’s business on the Mainland
When permitted, facilitate Mainland investors’ access to HK
Explore possibility of allowing Mainland EPs’ access to HK
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Agenda
1.
HKEx’s roles
2.
HKEx’s vision
3.
Direction and strategies
4.
Key initiative - China development
5.
Key initiative - Market infrastructures
6.
Key initiative - Investor protection
7.
Conclusion
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5. Key initiatives - Market infrastructures
A critical factor of Hong Kong’s success is the offering of efficient, secure
and reliable market infrastructures.
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Cash
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Derivatives
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Clearing
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Launch of AMS
Launch of off-floor trading system
Launch of AMS/3
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Launch of HKATS
Abolition of Trading Floor
Migration of stock options trading to HKATS
HKATS upgrade (OMex 17.1)
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Launch of CCASS
CCASS/3
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1993
1996
2000
1999
2000
2001
2003
1992
2003
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5. Key initiatives - Market infrastructures (cont’d)
In the next 3 years, HKEx will continue to ensure that our market infrastructures
meet the demands of our customers and the changing marketplace
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Policy
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Market
System
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Network
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Ensure that market infrastructures and operations meet international
standards
Offer secure, reliable, efficient and high quality market infrastructures
Increase operational efficiency and reduce operating costs
Launch of DCASS
Harmonise and where appropriate, consolidate derivatives clearing
operations
Increase immobalisation of securities in HKSCC Depository
Strengthen the reliability, security and availability of market systems
Explore the potential and market impacts of a scripless market
Introduce Enhanced CCASS Investor Participant Account services
Explore the possibility of network consolidation (i.e. AMS/3, CCASS/3,
HKATS and Market Data Feed) to seek cost reduction without sacrificing
serviceability and manageability
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Agenda
1.
HKEx’s roles
2.
HKEx’s vision
3.
Direction and strategies
4.
Key initiative - China development
5.
Key initiative - Market infrastructures
6.
Key initiative - Investor protection
7.
Conclusion
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6. Key initiatives - Investor protection
Investor confidence is vital for the success of HKEx markets. In the
next three years, HKEx will take action to enhance the current
structure, policy and operations to boost investor confidence
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Structure
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Policy
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Improve the listing regulatory structure based upon the
outcome of the Government review
Revamp the Listing Committee’s role in decision-making
and related structures
Improve disciplinary process
Promote the statutory backing for selected Listing Rules
Further develop corporate governance
Review initial listing criteria and continuing obligations
Consider delisting mechanism
Regulate sponsors and IFAs
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6. Key initiatives - Investor protection
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Practice
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(cont’d)
Review and improve enforcement process
Improve efficiency of listing application and IPO vetting
process
Increase transparency of Listing Unit’s operations
Improve investor education
Further improve Listing Unit’s staff quality and service
culture
Seek to improve directors’ understanding of Listing
Rules and regulatory requirements
Foster closer working relationship with other regulatory
bodies
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Agenda
1.
HKEx’s roles
2.
HKEx’s vision
3.
Direction and strategies
4.
Key initiative - China development
5.
Key initiative - Market infrastructures
6.
Key initiative - Investor protection
7.
Conclusion
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7. Conclusion
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The rapid growth of China’s economy and its opening
will create new opportunities for Hong Kong securities
and derivatives industry
HKEx’s future success will be built on three building
blocks: consolidation, building a quality market and
becoming a Mainland Partner
Expansion of our Mainland business, improvement of our
market infrastructures and the strengthening of investor
confidence will be the key to the accomplishment of our
goals.
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THANK YOU !
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