China and Hong Kong should create a single stock market to take-on the world's leading bourses, the head of the southern city's exchange said in an interview published on Friday.
Hong Kong Exchanges and Clearing (HKEx) chairman Ronald Arculli said he would welcome a single listing and trading platform that would cover Hong Kong, Shenzhen and Shanghai, the South China Morning Post reported. "This means companies could list on all three exchanges, while investors could freely trade on any of the markets," he said. "We can also work out some investment products to be traded on all three exchanges."
Arcullis added that under the proposed model, the exchanges could maintain different shareholding and company structures, but create a single listing system.
The plan comes as Hong Kong is pushing for closer ties with mainland exchanges in an effort not to be sidelined by the booming Shanghai stock market. Last week, the city's government announced they had upped their stake in the HKEx and on Wednesday Financial Secretary John Tsang raised the possibility of future share swaps between Shanghai and Hong Kong exchanges.
Arculli said the share-swapping scheme was one option, but it would be tricky to fully merge the bourses, as they have very different ownership structures.
"A full merger would not be ruled out but it needs to cope with a lot of difficulties such as the convertibility of the yuan and the structure of the exchanges," he told the Post.
"For example, HKEx is a listed company, while the stock exchanges of Shanghai and Shenzhen are fully owned by the [central] government." Arculli added that dual listings of companies in Hong Kong and Shanghai and the proposed scheme to allow individual mainland investors to buy Hong Kong equities for the first time had been steps to closer integration.
He added that the move would allow the markets to compete more aggressively with leading international bourses in New York, London and Tokyo. At the end of July Hong Kong had a total domestic market capitalisation of 2.2 trillion US dollars, according to the World Federation of Exchanges. Combined with Shanghai and Shenzhen, the figure would be 4.8 trillion dollars, just ahead of Japan's 4.7 trillion dollars, but behind New York's 16.4 trillion dollars.
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