Collaboration between bourses in Asia set to further strengthen, forum told

This is due to the relatively low level of competition between Asian bourses, along with the apparent benefits that come with deeper integration, although there are still barriers that need to be overcome, they told a regional forum.

Meanwhile, government support is also imperative for the progress of linkages between the region’s exchanges, and especially between those from different countries.

Speaking at the “Asia Securities Forum 2014: Harmonising Asia’s Capital Market” seminar in Bangkok, arranged by the Association of Thai Securities Companies (Asco), Michael Lin, president of the Taiwan Stock Exchange, said the global capital-market landscape was changing at a rapid pace.

One of the key drivers backing up the development is cross-border investment, which is becoming more and more common, he said.

“The connection between exchanges will be more common, and the Taiwan exchange is currently in talks with two other exchanges on such development, because the exchange industry in Asia is very different from that in America or in Europe, since we are in closer cooperation and contact,” he explained.

 “Connectivity between two exchanges can provide better support for investors and broker-dealers, while investment across markets and borders will be much easier, faster and more effective, and we can also better manage our risks – therefore the increase in cross-border activities is inevitable,” Lin added.

Pattera Dilokrungthirapop, Asco’s chairwoman, said the most interesting development in respect of integration between the region’s bourses was currently the Shanghai-Hong Kong Stock Connect, expected to be launched soon.

Thai investors need to gain more knowledge regarding opportunities and cross-border financial products, which will increase as a result of greater integration between regional markets, she said.

“The connection between the two capital markets [Shanghai and Hong Kong] will increase the fund flow trading in the Chinese market through Hong Kong, which is an interesting development given the large size of the two markets,” she added.

The Shanghai Stock Exchange is the largest emerging capital market in the world.

Tao Xuan, assistant director of Global Business Development at the Shanghai Stock Exchange, said connection between exchanges would be an important global trend.

The Shanghai-Hong Kong Stock Connect is an important milestone that will open up China’s capital market, while the connectivity will also enhance the two cities to become the financial centre in the region, he said.

“Hong Kong has a very strong capital market in Asia and the currency used for the Shanghai-Hong Kong Stock Connect will be offshore renminbi [RMB] in Hong Kong’s market, which means that once the stock connect is launched, Hong Kong will become the most important offshore RMB market in the region for the next 10 years,” he added.

Regarding the development of the Shanghai-Hong Kong Stock Connect, Xuan said: “There is nothing more pending, and the two exchanges are waiting for the final announcement from the state counsel of China, so from our perspective, all the readiness is finished.”

In terms of greater integration between exchanges, Lin said regulatory barriers were the No-1 priority that had to be overcome to better facilitate development.

Xuan, meanwhile, said another key point of connection between two stocks was government support, since the linkage of the markets required the regulators of the two countries involved to make neutral announcements and reach agreement in the fields of enforcement and supervision, in order to make the connection work.

 Kesara Manchusree, president of the Stock Exchange of Thailand, said the bourse aimed for further integration within the Asean Exchanges scheme, while regulatory complications such as non-voting depository receipts needed to be reduced and a clearing centre needed to be set up.

The government might also have to re-examine regulations regarding cross-border transactions in order to facilitate such development, she added.