The current path of Asian stock exchanges making cross-border investment easier through partnerships and linkages is set to continue, according to industry heads from throughout the region.
Bourses in Asia face little competition from each other, but leaders see much to gain by working together and increasing the free movement of capital – especially as Southeast Asia transforms into a single market with the ASEAN Economic Community (AEC) set to arrive in 2015, and with China seeking to better integrate its own capital markets.
“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” explained Michael Lin, president of the Taiwan Stock Exchange.
The largest example of collaboration is the planned Shanghai-Hong Kong Stock Connect. The proposal aims to link China’s two largest exchanges and as a result, will make trading stocks in mainland China possible for foreigners. A brokerage account in Hong Kong, but not one in mainland China, can be opened by a foreign national.
“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”, said Pattera Dilokrungthirapop, chairwoman of the Association of Thai Securities Companies (ASCO).
Tao Xuan, assistant director of Global Business Development at the Shanghai Stock Exchange, predicts that the linkage will greatly benefit the Chinese Yuan and make it more usable as a global currency.
“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 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 said.
Outside of China, ASEAN Exchanges will link seven bourses in Southeast Asia together in preparation for the AEC. The plan involves Vietnam (which has two main exchanges), Malaysia, Indonesia, Thailand, the Philippines and Singapore.
The seven exchanges have a combined market capitalization of around US$2.9 trillion, and together have over 3,600 companies listed on them.