the mainland china dimension of the hong kong securities market charles lee chairman, hkex china...
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The Mainland China Dimension of the Hong Kong Securities Market
Charles Lee Chairman, HKEx
China Financial ForumOrganised by Nomura Securities Co., Ltd
26 November 2004
2
1. Highlights of the Hong Kong Securities Market
2. Mainland China Dimension
3. HKEx Positioning
4. Conclusions
Agenda
3Source: World Federation of Exchanges, includes main board and parallel markets
HKEx is currently ranked 8th among global exchanges by market capitalisation …
11,657
3,1273,124 2,505
2,095
1,047 1,013 764 760 725 648 637 381 345 342 334 149
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
NY
SE
Tok
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Nas
daq
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Ger
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Aus
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ngha
i
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ea
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nnes
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She
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US$ billion
HK:ranked 8th
Shanghai: ranked 14th
Shenzhen: ranked 24th
Sum of HK, Shanghai and Shenzhen ranked 6th in the world
(Market cap = US$1,258 bn)
Sum of HK, Shanghai and Shenzhen ranked 6th in the world
(Market cap = US$1,258 bn)
201
Sin
gapo
re
Singapore: ranked 21st
Sep 2004
4Source: World Federation of Exchanges (not including exchanges for which statistics are not available). Includes capital raised by issuers cross-listed on other exchanges, i.e. some double-counting involved.
… and 2nd by equity fund raised
82.9
28.4
23.9
18.7 17.515.4 15.0 15.0
11.89.9
6.4 5.6 5.22.7
0
10
20
30
40
50
60
70
80
90N
YS
E
Hon
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ong
Lo
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To
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on
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So
uth
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ica
Sha
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HK:ranked 2nd
Shanghai: ranked 13th
Shenzhen: ranked 20th
Sum of HK, Shanghai and Shenzhen ranks 2nd in the world
(Capital raised = US$36.3 bn)
Sum of HK, Shanghai and Shenzhen ranks 2nd in the world
(Capital raised = US$36.3 bn)
Sin
ga
po
re
Singapore: ranked 28th
1.3
US$ billion Jan - Sep 2004
5
Total turnover (US$bn)
Total # of derivatives contracts traded (mn)
# of new listings – equity
Average daily turnover (US$bn)
Average daily # of derivatives contracts traded
2003 2002
Total fund raised (US$bn)
331.3
1.3
14.5
59,011
73
7.6
19.8
27.4
210.6
0.9
11.0
45,018
117
6.7
7.5
14.2
YTD Oct 2004
401.1
2.0
16.2
79,554
56
8.9
21.5
30.4
Hong Kong cash and derivatives markets –Key statistics
Fund raised by IPOs (US$bn)
Fund raised in secondary market (US$bn)
6
1. Highlights of the Hong Kong Securities Market
2. Mainland China Dimension
3. HKEx Positioning
4. Conclusions
Agenda
7
Quotes from China’s Vice Premier, Huang Ju
“HK had established increasingly close ties with the Mainland finance sector in recent years”
“It is a win-win situation which:
encourages reforms within the Mainland listed enterprises
contributes to the development and prosperity of the Hong Kong financial sector”
“HK had established increasingly close ties with the Mainland finance sector in recent years”
“It is a win-win situation which:
encourages reforms within the Mainland listed enterprises
contributes to the development and prosperity of the Hong Kong financial sector”
“Room for further development was substantial”
“CEPA clearly states that the Mainland and HK will strengthen cooperation on various fronts in the financial sector”
“With its implementation, finance practitioners on the Mainland and in HK will cooperate in a greater number of areas and on a higher plane, allowing HK to develop better as an international finance centre”
“Room for further development was substantial”
“CEPA clearly states that the Mainland and HK will strengthen cooperation on various fronts in the financial sector”
“With its implementation, finance practitioners on the Mainland and in HK will cooperate in a greater number of areas and on a higher plane, allowing HK to develop better as an international finance centre”
On HK’s statusOn HK’s status
On further co-operation between Mainland & HK
On further co-operation between Mainland & HK
8
Since the 1980s, Hong Kong has played a key role as a bridge between Mainland China and the world
1980 1993 2003
Many HK listed companies had manufacturing operations in Pearl River Delta
HK- or foreign-incorporated Mainland enterprises listed in HK as Red Chips
H-shares market developed
Some H-share and Red-Chip companies dual listed on HK and overseas markets
H-shares Index Futures launched
Key Events
A total of US$230 billion raised in the past ten years
Since 1993, US$113 billion of equity capital (49% of total) raised by Mainland enterprises listed in Hong Kong
H-shares Index Futures an early success (>7,000 contracts a day)
2004
H-shares Index Options launched
Stock options, futures and warrants for individual Mainland enterprises
1994 onwards
9
Mainland enterprises listed in HK are subject to market discipline in accordance with international standards
Management practices
Accounting
Corporate governance
Key elements
Code of Corporate Governance
Initial listing obligations
Continual listing obligations
Enforcement by regulators
Areas subject to market discipline
International Accounting Standards; or
Hong Kong Financial Reporting Standards
Compete with other internationally recognised companies
10
Mainland China dimension of the Hong Kong securities market
As at 31 Oct 2004 or Jan-Oct 2004
Listed issuers
Fund raised by IPOs (US$bn)
Avg daily turnover (US$bn)
Total HK market
Mainland enterprises*
Market capitalisation (US$bn)
1,084
769
2.0
58
8.9
21.5
30.4
286
226
1.0
33
6.4
4.2
10.6
26%
29%
48%
57%
72%
20%
35%Total fund raised (US$bn)
# of new listings – equity
Fund raised in secondary market (US$bn)
* Includes H shares, red chips and private enterprises
11
The 10 largest IPOs in HK since 1993 have all been by Mainland enterprises
Capital RaisedRanking Company Date of Listing (US$ bn)
1
2
3
4
5
6
7
8
9
10
China Unicom
China Mobile
China Life
Sinopec
PetroChina
BOC (HK)
Ping An Insurance
SMIC
China Telecom
CNOOC
2000
1997
2003
2000
2000
2002
2004
2004
2001
2001
5.6
4.2
3.4
3.4
2.9
2.6
1.8
1.8
1.5
1.4
Largest IPO in the world in 2003
12
In 2003, 8 out of the 10 largest IPOs were Mainland enterprises
2003 Capital RaisedRanking Company (US$ mil)
1
2
3
4
5
6
7
8
9
10
China Life
PICC
Sinotrans
Hopewell Highway Infrastructure
China Resources Power
Weiqiao Textile
AviChina Industry & Technology
Great Wall Automobile
Fujian Zijin Mining
Lee & Man Paper Manufacturing
3,424
798
502
386
380
313
261
224
169
148
13
6 out of the 10 highest turnover HK-listed companies are Mainland enterprises
2004 Jan-Oct TurnoverRanking Company (US$ bn)
1
2
3
4
5
6
7
8
9
10
HSBC
PetroChina
Hutchison Whampoa
China Mobile
Sun Hung Kai Properties
China Life Insurance
BOC (HK)
Cheung Kong
Sinopec
China Telecom
36.6
16.3
13.8
13.4
11.7
10.5
9.8
9.7
9.4
7.1
14
6 out of the 10 highest net profit HK-listed companies are Mainland enterprises
2003 Net ProfitRanking Company (US$ bn)
1
2
3
4
5
6
7
8
9
10
HSBC
PetroChina
China Mobile
China Telecom
Sinopec
Hutchison Whampoa
CNOOC
Cheung Kong
Hang Seng Bank
BOC (HK)
8.8
8.5
4.3
3
2.6
1.8
1.4
1.3
1.2
1.0
15
1. Highlights of the Hong Kong Securities Market
2. Mainland China Dimension
3. HKEx Positioning
4. Conclusions
Agenda
16
Business focus
Geographical focus
Focus on core market operations: Listing Trading Clearing Information Services Market systems
Focus on Hong Kong and Mainland China
HKEx strategic vision
Goal
Operate a quality market through enhancing regulation and market infrastructure in accordance with international best practices and standards
17
HKEx’s major 2004 achievements and 2005 initiatives
Enhance market quality
Enhance market quality
2004 Achievements 2005 Initiatives
Enhanced corporate governance standards
Enhanced regulation of Sponsors & IFAs
Support enshrining of key listing rules in statute
Facilitate simultaneous listing of A & H shares
Improve market infrastructure
Improve market infrastructure
Maintained 100% uptime for all market systems
Launched integrated derivatives system
Upgrade capacity of trading systems
Consolidate network for all market systems
Enhance Mainland business development
Enhance Mainland business development
Strengthened Beijing Office
Organised listing promotional conferences on the Mainland
Promote listing of foreign-controlled companies with Mainland operations
Introduce more Mainland products
Introduce more Mainland products
Launched a number of Mainland-related products
Launch additional Mainland- related products
Expand information dissemination in selected regional markets
18
Mainland finance sector and Hong Kong are in a win-win
situation which:
Encourages reforms within the Mainland enterprises
Contributes to development and prosperity of the Hong Kong financial
sector
To be successful, HKEx is committed to:
Focusing on developing the opportunities presented by Mainland
enterprises
Further enhancing market quality
Conclusions
19
Thank you