Faced with fewer IPOs from the Chinese mainland, Hong Kong Exchanges and Clearing (HKEx) is looking to extend its search internationally.

The markets in Israel and Russia, for instance, could help HKEx diversify its revenue sources.

"The Hong Kong Exchange not only aims to attract foreign firms to list in Hong Kong, but also attract investors and sovereign funds to set up offices in the city," HKEx Chairman Ronald Arculli said.

More managers of multi-billion-dollar government funds would boost liquidity and broaden their investor base in Hong Kong, Arculli said. Huge funds run by China, Singapore and governments in the Middle East have become increasingly prominent investors globally in the wake of the credit crunch that began last year.

HKEx officials have been traveling the world, looking to attract firms to make primary or secondary listings in Hong Kong - an effort that Arculli said has yet to result in listings from the targeted new markets, although potential deals are in the works.

This past weekend, Arculli was in Israel and met with officials of the Tel Aviv bourse, as well as executives from local companies, including Israel Corp, owner of container shipper ZIM Integrated Shipping Services. ZIM has expressed interest in a dual listing in Hong Kong and Tel Aviv.

Russia's United Company RUSAL, the world's top primary aluminum producer, is considering moving a planned initial public offering from London to Hong Kong, media reports have said. Russian molybdenum miner SMR said in February that it plans to float at least 25 percent of the firm in Hong Kong by the fourth quarter. Hong Kong, the world's seventh-largest bourse by value, faces competition for listings from bigger financial centers such as London and New York, as well as upstarts such as Dubai, which are also aggressively courting listings.

Arculli said the Hong Kong bourse, which is 5.9 percent-owned by the Hong Kong government, boasts lower listing and compliance fees than the New York and London boards.

"Hong Kong is a liquid market, turnover is active, and the listing and post-listing market are broad and mature," Arculli said.

About 45 percent of Hong Kong's investor base is international institutions, 25 percent is local institutions and 30 percent is made up of local retail investors.

"From 2004 to 2006, the Hong Kong exchange aimed to draw mainland firms for listings. After 2006, we did not give up the mainland market. But at the same time, we have been promoting Hong Kong as a financial center outside Asia," Arculli said.

He expects the Hong Kong exchange to launch gold futures in the third quarter, while the details on depositary receipts could be announced as early as the second quarter.

He said a number of exchanges elsewhere plan to cooperate with Hong Kong on emissions trading, but he declined to give details.

Reuters

(HK Edition 05/08/2008 page3)