Ronald Arculli, shown in our illustration, the chairman of Hong Kong Exchanges and Clearing, the company that owns the local exchange, has made no secret of the fact that closer integration with the booming exchanges of Shanghai and Shenzhen — up 120% and 175% respectively this year — and tapping the huge savings of Chinese investors is vital to future prosperity for one of the world’s great financial centers.

In an interim results report for the first half of the year Hong Kong Exchanges and Clearing noted that of 32 listing applications, 23 were from mainland companies.

Mainland listings and relaxed rules on China’s outbound investment have been big contributors to a profit surge for the company: first-half profit more than doubled to about $30 million, compared with the same period last year. Average daily turnover on the exchange was 82% higher than last year.

That is not to say that the idea is welcomed with open arms in China. A report by CLSA Asia Pacific Markets released last month said:

‘There is a sense among some people that Hong Kong can be cast aside as soon as the larger national system gets up to speed, which is why there are sentiments that Shanghai will take over Hong Kong’s role as the premier financial center one of these days.’

On Sept. 7, the Hong Kong government announced that it had lifted its holdings in the Hong Kong exchange to 5.9%. The reason for the acquisition — above a threshold that normally requires regulatory approval — was to support the exchange’s ’strategic development,’ the government said in a statement.

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Source: International Herald Tribune