China adds incentives to boost HK markets

The potential "huge amount" in H-share companies' share placement is the future driver to sustain the robust growth of Hong Kong's stock market, Charles Li, chief executive of Hong Kong Exchanges and Clearing Limited (HKEx) said Wednesday.

Li told an HKEx's press conference that Hong Kong currently has about 20 trillion HK dollars (about 2.58 trillion U.S. dollars) market capitalization for all the companies listed in the city, thanks to the IPO boom in the last 15 years.

However, another 11 trillion HK dollars worth of wealth in the H-share companies' state-owned shares, which are now unlisted in Hong Kong, are eyed as the future driver to the market's structural growth, he said, noting that a small portion of those shares are listed in the A-share market, with the trunk of them still in major shareholders' pockets.

He said that in the coming decade, when China begins to transform its economy from investing and exporting to consuming and providing social safety net, the government will tap into that "huge massive" 11 trillion HK dollars worth of wealth.

"When the government becomes more and more like a fund manager over the next 10 year, this (the unlisted shares) will become monetized," he said, citing the share placement as one way to play the role.

The potential add-ons will not only help the financial institutions strengthen their capital adequacy, but also boost the non-financial institutions' funding growth and overseas expansion, Li said.

In addition, the unlocking of the wealth will help "substantially" fuel HKEx's velocity, he said, citing statistics from the World Federation of Exchanges (WFE) dated Jan. 31, 2012.

The WFE data showed the velocity of NASDAQ Stock Market in 2011 was 291 percent, compared with the 125 percent in New York Stock Exchange, 218 percent in Shanghai Stock Exchange and 218 percent in Shenzhen Stock Exchange. By comparison, HKEx was 55 percent.

To accommodate the potential increasing velocity, HKEx expects to more than double its capital expenditure in 2012 to about 1.6 billion HK dollars from 7.32 billion HK dollars in 2011, mainly to establish a new data system and related hosting services.

According to HKEx's 2011 annual results released on Wednesday, the company's net profit rose 1 percent to 5.09 billion HK dollars from that of 2010, with a 4 percent rise in revenue to 7.86 billion HK dollars. The Earnings Per Share was up 1 percent to 4.73 HK dollars.

HKEx offers 2.09 HK dollars final dividend, bringing the whole year dividend to 4.25 HK dollars, up 1 percent from that of 2010.