Hong Kong Exchanges and Clearing reported modest profits but the delayed Shanghai-Hong Kong Connect program may be weighing on investors’ minds both at home and abroad. Sareena Dayaram reports.
It's one of the most talked about stock exchanges in the world - and it's also amongst the most valuable. Hong Kong Exchanges and Clearing, more popularly known as HKEx, reported a modest six percent jump in third quarter profits to 165 million dollars. That's thanks to an increase in trading volumes ahead of the highly anticipated - but delayed - trading link with Shanghai. HKEx Chief Executive Charles Li didn't clarify when the Shanghai link would eventually be launched even though the scheme's technical and regulatory work was complete. So what's the hold-up? Apparently, it's the green light from regulators. Other market watchers believe the launch date might have been postponed due to dismay over the pro-democracy protests in Hong Kong, which crippled parts of the city. Under the scheme, international investors are expected to be allowed to trade Shanghai's 'A' shares via the Hong Kong stock exchange in real time, while mainland investors will be able to trade Hong Kong 'H' shares via the Shanghai Stock Exchange, subject to quotas both ways. (SOUNDBITE) (English) HEAD OF EQUITY STRATEGY ASIA-PACIFIC, HSBC, HERALD VAN DER LINDE, SAYING: "I think talking to, say, our institutional clients, where the real interest is is not necessarily in the larger big-cap companies, for example banks. You can buy these banks in Hong Kong to a large extent already or oil companies. Where I think the real interest is in new other companies which are not - you can't really find in Hong Kong or across the region at this particular point in time." Shares of HKEx have surged over 30 percent this year, compared with a paltry rise in the benchmark Hang Seng Index as investors bet the proposed link will boost trading volumes. According to BNP Paribas estimates, the program will boost the average daily value of trading by nearly 40 percent to 12 billion dollars by 2015. Meanwhile, the street's pretty bullish on HKEx with 14 of the analysts polled by Reuters recommending either a buy or a strong buy. (SOUNDBITE) (English) REUTERS REPORTER, SAREENA DAYARAM, SAYING: "Despite the bullish outlook of the city's stock market operator, the delay of the Shanghai link without any form of explanation doesn't give investors too much confidence in the way these reforms will be carried out, if they are at all."