Nong Kong, Singapore Markets Tussle
HONG KONG (AP) _ After busting the stock speculators at home, Hong Kong is now trying to stop them abroad as it fights Singapore’s plans to open a futures market that tracks the blue-chip Hang Seng Index.
And once again, investors worry that Hong Kong’s laissez-faire system could be getting too much hands-on control.
Executives of the feuding exchanges met here Friday but reported no progress in making peace. The talks came just two weeks before the planned Nov. 23 launch of trading on the Singapore International Monetary Exchange of a stock index that is virtually a carbon copy of the Hang Seng.
The chief executive of the Hong Kong Stock Exchange, Alec Tsui, told reporters after the meeting that he will press ahead with efforts to block Singapore’s access to real-time stock quotes.
If Singapore’s SIMEX, as the exchange is known, cannot get instant prices, its new futures contract might be unable to survive in a global market where dealers respond to major events in mere seconds.
SIMEX President Ang Swee Tian said late Friday in a statement that he had assured Hong Kong executives the futures dealings would ``preserve market integrity, prevent market manipulation and protect customers’ interests.″
The meeting included representatives of Morgan Stanley Capital International, which compiles the Hong Kong index that SIMEX wants to trade. SIMEX says its futures will have a ``99.995 percent correlation with the Hang Seng Index.″
Hong Kong exchange executives worry that futures traders in Singapore could end up manipulating Hong Kong prices in dealings beyond their regulatory reach.
``We don’t know what the regulation is of that offshore market,″ said Henry Law, a spokesman for the Hong Kong Exchange. He added: ``You don’t expect your competitor to support you.″
SIMEX officials say they were surprised by Hong Kong’s reaction and added their regulations ``are in line with international standards of best practice.″
SIMEX already conducts offshore futures trading based on Tokyo and Taipei shares, and it says Hong Kong’s stance goes against regulators’ previous statements that anybody is free to trade derivatives based on Hong Kong shares.
Controversy over control of the markets is nothing new in Hong Kong.
The territory’s government faced a crisis in the summer, when traders were selling the Hong Kong dollar, forcing monetary authorities to drive up interest rates, while at the same time selling shares, which went down as interest rates went up.
Seeing no end to the spiral, the government intervened, snapping up $15 billion in shares to drive out the speculators.
The Hong Kong Futures Exchange then reformed its rules in an effort to stop large investors from manipulating prices, by requiring disclosure of anybody who makes particularly large bets on the market.
The feud with SIMEX prompted more changes as the Hong Kong futures exchange tries to protect its own business selling Hang Seng futures.
The chief executive, Randy Gilmore, said Friday his market will cut trading fees and extend opening hours ``to meet the SIMEX challenge.″
Hong Kong stock bosses also met with financial information provider Reuters, reportedly to tell Reuters not to distribute real-time stock prices to SIMEX.
It remains unclear whether the Hong Kong exchange can stop the flow of information, however.
The latest moves in Hong Kong are raising concerns among traders who are still unsure whether the government market intervention will have any lasting impact on investor confidence.
Few are willing to air their gripes publicly, however.
``It seems like they just want a lot of control in the market here which investors don’t like,″ said one futures trader at a major Hong Kong brokerage, speaking only on condition of anonymity.