Hong Kong Mercantile Exchange Set for Launch amid Commodities Demand

Sept. 9, 2008 - PRLog -- The global demand for commodities is surging at an unprecedented rate and the soon-to-open Hong Kong Mercantile Exchange is poised to capitalize on the trend, financial consultancy Zetland reports.

Open only to institutional investors, the HKMEx expects to start trading in the first quarter of next year, pending approval from the Hong Kong Securities and Futures Commission, likely by the end of 2008. The new exchange will operate on an electronic platform during the Asian hours of 10 a.m. to 5:30 p.m., but will eventually extend its operation to 23 hours a day.

The exchange will be headed by oil industry veteran Barry Cheung. The former Deputy Chairman of the Titan Petrochemicals Group said the timing is right. China’s role in setting prices for petroleum and other raw materials is growing, and the move aims to capitalize on demand, particularly in Asia, for commodities, says Cheung.
 
Commodity trading and consumption in China and Asia have been growing at an unprecedented speed over the past few years, while at the same time there are insufficient hedging mechanisms for these products, Cheung noted.

“The exchange will provide more price relevancy that better reflects mainland China's underlying supply and demand and enable Chinese traders to have more pricing power in the world's commodities markets," Cheung said.

The HKMEx will initially sell fuel oil contracts in U.S. dollars for delivery to the mainland, where it is often used in the shipping and industrial sectors. Potential investors include global investment banks Barclays Capital, Lehman Brothers and Merrill Lynch, as well as end-users such as the Noble Group and major mainland companies, including Citi Group and China Resources.

China, the world's second-largest oil consumer behind the United States, currently uses Singapore futures as a reference for fuel-oil bargaining.

"What we're offering is a product not currently available on the market: fuel oil contracts that are freely traded in U.S. dollars and delivered in China," Cheung said.

The report by the Hong Kong Trade Development Council is one of many carried each month by Hong Kong-based Zetland Fiduciary Group on its comprehensive website.

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Zetland Financial Group’s report is one of many offered each month on its comprehensive website. Zetland provides business and financial consultancy internationally and in the Asia region with an emphasis on operations in China.