The Hong Kong government announced on Friday that it had increased its shareholding in bourse operator Hong Kong Exchanges and Clearing (0388) to 5.88 percent, a stake that will be retained by the Exchange Fund as a strategic asset.
In the recent share purchases, which pushed the government's shareholding over the 5 percent threshold, the government spent HK$2.44 billion to buy 15.72 million shares, according to market sources. It paid an average HK$155.22 per share to increase its stake from 4.41 percent to 5.88 percent, based on calculations using the number of shares and total cost provided by the source. The Hong Kong government is the single largest shareholder in HKEx.
Sources said the government began buying HKEx shares at an average price of HK$50 last year, when HKEx first became a Hang Seng Index constituent.
Market sources said the government wants to become more involved in the running of HKEx so it can work toward implementing some of the action items in a January report, released after the economic summit on "China's 11th Five-Year Plan and the Development of Hong Kong."
The report proposes establishing a platform for cross-trading of securities listed in Hong Kong and the mainland, as well as links with mainland exchanges to facilitate mobility of investment products and investors. The government report also proposes the mainland stock and futures exchanges take HKEx as the preferred partner for cooperation over exchanges elsewhere, to "pave the way for integration of the two markets in substance."
Financial Secretary John Tsang Chun-wah said the gradual acquisition of a significant stake in HKEx was a demonstration of long-term confidence in the exchange operator. "HKEx is one of Hong Kong's principal engines of growth," Tsang said. "This acquisition underlines the government's support for HKEx and enables the government, over the longer term, to contribute as a shareholder to the promotion of HKEx's strategic development."
HKEx chairman Ronald Arculli said the company appreciates the Hong Kong government's confidence in HKEx. "We will continue with our best endeavors to strengthen our markets to reinforce Hong Kong's position as the most important international financial center in this region," Arculli said.
Arculli said he does not expect the government's plans for the future to conflict with those of HKEx. The government appoints six of HKEx's 13 directors, including the chairman.
Asked whether HKEx will have any cooperation with mainland bourses in the future, Arculli told reporters they should ask the government.
A spokeswoman for the Hong Kong Monetary Authority said it would not rule out proposing candidates to join the HKEx board if it could help the future development of HKEx. She stressed the HKMA sees the stake boost not as an investment but a strategic arrangement.
HKEx shares jumped 6.8 percent to HK$158 before the announcement.