Hong Kong exchange in "early stage" of creating commodities trading link with mainland China

A staff member looking at a panel displaying the closing Hang Seng Index at the Hong Kong Exchanges in Hong Kong on April 8, 2015. -- PHOTO: REUTERS
A staff member looking at a panel displaying the closing Hang Seng Index at the Hong Kong Exchanges in Hong Kong on April 8, 2015. -- PHOTO: REUTERS

HONG KONG (Bloomberg, Reuters) - Hong Kong Exchanges & Clearing Ltd. is in the "early stage" of creating a commodities trading connection with mainland China, Chief Executive Office Charles Li said Wednesday.

The link would be similar to its stock connection to Shanghai, which began trading in November. It also plans a Shenzhen equity link to begin in the second half of this year.

"Today in commodities, we are in that early stage," Li said today at a conference in Hong Kong. The speed of the connection is "probably a lot shorter than what it took us to do stock connect," he said.

HKEx, owner of the London Metal Exchange (LME), the world's biggest metals bourse, is seeking to tap into rising commodity trading volumes in China, the world's top consumer of energy, metals and grains.

HKEx first floated the idea of creating a link to trade commodities with mainland China last October.

It took an expensive gamble in December 2012 by paying US$2.2 billion to buy the LME and diversify into commodities. Although initially beset by high costs, the deal has begun to yield benefits for HKEx as a trading fee increase on the LME this January boosted revenues.

Mr Li said HKEx had not yet indentified which mainland exchange would make a suitable partner for the proposed commodities link. He likened the level of progress on the commodities link plan to that of the stock connect programme three years ago, saying there were still many details to be worked out.

Expanding into China, which accounts for about 40 per cent of global copper demand and similar shares of other metals trade, is a central strategy for boosting the LME's performance, officials have said.