HKEX: Primary connect key to winning Saudi Aramco

Hong Kong Exchanges & Clearing head Charles Li said primary connect is the "next big thing" although it may take a while.
Hong Kong Exchanges & Clearing head Charles Li said primary connect is the "next big thing" although it may take a while.

HONG KONG • Hong Kong Exchanges & Clearing (HKEX)'s bid for Saudi Arabian Oil's listing would get a boost from having a primary connect trading system with mainland China, according to its chief executive.

HKEX has so far created three links with domestic Chinese markets, and chief executive Charles Li has plans for several others. The primary connect, which would see shares in Hong Kong-based initial public offerings (IPOs) made available to mainland investors, would act as a lure to major companies, he said in an interview on Bloomberg Television yesterday.

"For Saudi Aramco to consider listing in Hong Kong, just a pure Hong Kong listing would probably not be compelling," Mr Li said. To be able to list in the city and sell shares into major Chinese institutions would be the "perfect catalyst" for primary connect, he said.

Saudi Arabia aims to sell about 5 per cent of Aramco in an IPO next year, and stock exchanges from the UK to Japan are vying for what may be the world's richest public debut. The main contenders are bourses in London, New York, Hong Kong, Tokyo, Singapore and Toronto.

Primary connect is the "next big thing" said Mr Li, though he added that it "will take a while".

The exchange operator's shares fell as much as 5.4 per cent in yesterday morning's trading, its biggest intraday drop in more than a year.

HKEX posted second-quarter profits of HK$1.78 billion (S$312 million) on Wednesday, a 14 per cent increase from HK$1.55 billion a year earlier. Revenue for the quarter was HK$2.76 billion, the company said, compared with HK$2.73 billion the year before.

Mr Li said in an earnings conference on Wednesday that there is no timetable for new links between Hong Kong and the mainland.

As well as primary connect, other suggested systems would include exchange-traded funds and derivatives.

Mr Li also said that the consultation for a proposed third exchange targeting new economy companies and allowing dual-class share structures is close to finishing.

"If there is a broader support for us to proceed we will proceed," said Mr Li. "If not, we may not proceed, that's really basically the consultation. But I do believe the market has moved on from where we were a few years ago."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 11, 2017, with the headline 'HKEX: Primary connect key to winning Saudi Aramco'. Print Edition | Subscribe