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Charles Li, CEO of Hong Kong Stock Exchange (HKEx), addresses at the "LME Week Asia" on Tuesday. (APD/Pan Jie).
The ambitious plan of Hong Kong Stock Exchange (HKEx) into commodities trading business will neither harm the interests of London nor that of the Chinese mainland, HKEx's chief executive Charles Li said on Tuesday.
Addressing at the "LME Week Asia", the first such event Hong Kong has ever held on metals trading, Li said HKEx will not change the operation of London Metal Exchange (LME) after acquiring it last December, but will merely seek a fair share of "newly created value".
Calling LME a " business model that is already highly successful ", Li said they "fully recognize the vital DNA of LME ecosystem" and are not interested in "value destruction" or "redistribution". His plan is to achieve "value creation"; or in other words, using LME to move into the base metal business in Asia and commodities other than metals.
However, he said they may not exactly replicate the LME model in Asia or in other commodities. "We want to have the flexibility, optionalities and abilities to potentially look for a bigger market share and seek multiple business models," he said. "And we hope we will bring the traditional LME model into the new frontier."
In terms of possible competition with existing mainland counterparts in the commodities business, Li intentionally switched to Mandarin, explaining to stakeholders that while competition does exist in line with cooperation, his plan is to work in partnership with mainland counterparts to boost growth of trade volumes, and the competition will only exist in the "newly created trade volumes".
"Although the mainland is the largest 'volume maker' in the commodities market, it is still passively receive the international market price," he said. "We hope Hong Kong will become a place where mainland can play a greater role in future price-setting."
Li pinned his hope on Hong Kong as the first stop rather than a final destination in mainland's internalization process. On preparing the city for commodities trading, he said they need to work on both educating local market participants and improving the regulatory infrastructure of commodity trading.
HKEx is the world's No.2 exchange operator by market value. It paid $2.2 billion to acquire LME last year as it seeks to expand beyond its traditional business in equities trading into the commodities market.
