The Hong Kong Stock Exchange said it was in talks with its peers in Shanghai and Shenzhen to set up a joint venture for equity derivatives and index compilations, a move that would represent the first concrete link between the three exchanges.
The move by Hong Kong Exchanges and Clearing Ltd (HKEx) foreshadows deeper ties to come in the future and comes a day after China’s Vice Premier Li Keqiang announced measures to further liberalize cross-border investments between Hong Kong and the mainland.
HKEx may also help develop China’s equities derivatives market, said BNP Paribas analyst Dominic Chan, following Wednesday’s announcement that exchange-traded funds (ETF) linked to Hong Kong stocks would be launched in the mainland.
“I think the key is that the derivatives market is still in its infancy in China,” Chan said. “Shanghai and Shenzhen need help developing that market and that’s where the Hong Kong exchange steps in.”
Hong Kong, Shanghai and Shenzhen recorded total IPO proceeds of over $44 billion so far this year when added together, according to Thomson Reuters data, with Hong Kong attracting international names such as Prada.
Cooperation between HKEx and its mainland peers has so far been limited by the mainland’s closed capital account, but measures to further liberalize the use of the yuan could change that, analysts said.