The new Hong Kong Mercantile Exchange (HKMEx), plans to start trading fuel-oil contracts in the first quarter of 2009.
The goal of the planned commodities exchange is to tap into the growing raw-materials demand in China, said Barry Cheung, chairman of the HKMEx and a former deputy chairman of Titan Petrochemicals Group.
If approved by the Securities and Futures Commission this year, the exchange will open in early 2009, and the first traded contracts are said to be fuel-oil related.
By bridging the international commodities market with China, Cheung said the HKMEx will provide a pricing platform for end-users and global investors to trade contracts, hedge pricing risks in China and lower the transaction costs.
The government is pleased to see the formation of the HKMEx.
"There is a huge opportunity for Hong Kong to develop a commodities-futures market," Financial Secretary John Tsang said.
Cheung told reporters yesterday that the HKMEx's $50 million capital will come from shareholders, and the shareholding structure will be confirmed in the third quarter. Cheung may hold the shares, and Titan Petrochemicals Group will be one of the shareholders, but he said that the government won't hold a stake.
Fuel-oil contracts are already being trading on the Shanghai Futures Exchange (SHFE), Singapore Commodity Exchange (SICOM) and Tokyo Commodity Exchange (TOCOM).
Cheung said the HKMEx can serve as a bridge between China and other countries. The US-dollar-denominated fuel-oil contracts are also economically advantageous, as those trading on the SHFE are renminbi-denominated.
The New York Mercantile Exchange (NYMEX) is the main competitor, said Alex Poon, a vice-president of ADMIS Hong Kong.
He said fuel-oil contracts are trading at an average of 70,000 daily on the SHFE, and 500,000 on the NYMEX.
Cheung said new contracts will be added to the HKMEx after about six months of just fuel-oil trading. He said the main concern for the new exchange's success is thin trading.
He suggested that the HKMEx launch products that aren't available in the SHFE, such as US crude futures.
(HK Edition 06/26/2008 page2)