HK Stock Exchange, we have a problem - Part 2

Yes, you should note the problem is getting bigger. Reuters has just reported that many companies listed in US are eager to list in Shanghai. That will be the trend, I'm afraid and many more companies in other countries will follow the example. Finally, there is a reason to "merge" the Hong Kong Stock Exchange with the Shanghai Stock Exchange. In order to survive as an international financial exchange, the Hong Kong SE should relinquish its separate identity and become part of the stock exchange regime of our motherland, China. If it refuses to ride with the tide, the Hong Kong Stock Exchange will become redundant or obsolete. Once foreign companies like MNCs listed in US go to list their shares in Shanghai, the whole world will go to Shanghai SE. "H" shares listed in HK may still have some value but may be largely ignored or neglected when compared with the shares listed in Shanghai. Clearly, it will be difficult to imagine making good capital gains from H shares listed in Hong Kong when the players in the market are in Shanghai. This is evident from the price gap between "A" shares listed in Mainland China and "H" shares in HK. The gap is only narrowed down after stock markets inside Mainland China has tumbled. The leaders are in Shanghai and Shenzhen, not in Hong Kong.

The Hong Kong Stock Exchange must give up its pride and submit to the exchanges in Shanghai and Shenzhen. Hopefully, this may help to secure a dual listing of the shares of US listed companies in both exchanges of Shanghai and Hong Kong. But even with such submission, the prospect is uncertain. Why? US companies may not like to waste their resources for maintaining a listing in HK. After all, none of the US listed MNCs in Hong Kong has traded well locally so far. Nasdaq companies like Microsoft, Intel, Starbucks, etc., whose shares are available for trading on the HKSE have been largely ignored by the Hong Kong stock market and when these companies are listed in Shanghai, it is difficult to imagine that the Hong Kong market can greet such development by any positive reaction. My guess is that they will cancel their listing in Hong Kong at the end and move entirely to listing in Shanghai and Shenzhen.

You know there are several other places in Mainland China developing new stock exchanges whether in the form similar to Nasdaq, 2nd Board, OTC, AIM listings etc. Yes, the tide is turning against the local Hong Kong Stock Exchange and God knows what can it do to survive the changes.

The situation is made worse because HKD has become a sinking currency. It is depreciating rapidly against the Chinese Yuan, RMB, and against all other major currencies, EUR, GBP, Yen, CAD, AUD, NZD and even USD! When you can't have faith in the power of HKD, you can hardly hold investments denominated in HKD. And unfortunately, we cannot delink HKD from USD nor can we peg HKD to RMB. It's a deadlock. The ruling elite in Hong Kong, namely, big banks and landlords, may be seriously affected once the HKD and USD peg is abolished. The local government will be the last one to support such change when the responsibilities may be unforeseeable. This is something only our Central Government in Beijing can give guidance and advice and decision may only be made in Beijing.

God bless us. I will still have to hold on to the sinking HKD.