HKEx’s Li targets China growth after $2.2 billion LME deal

Frozen Fees

The LME, founded more than a century ago above a hat shop in London’s financial district, trades metals including copper, zinc and tin, helping to establish benchmark prices. The HKEx pledged as part of the takeover not to raise fees until 2015.

China accounted for 41% of global copper consumption last year, using 8.3 million metric tons, according to data from Barclays Plc. The largest economy after the U.S. accounted for 43% of global aluminum demand and 44% for lead.

The company will study the potential development of yuan- denominated commodity products for HKEx platforms, Li said yesterday at the signing of a memorandum of understanding with Bank of China Ltd. The bank clears the currency for Hong Kong, Macau and Taiwan and its investment-banking unit became an LME clearing member last year.

LMEClear, the metal bourse’s new clearing house, will be running by September next year, Li said in the interview with Bloomberg Television. Hong Kong Exchanges is working toward building a yuan-denominated product-clearing capability into the system before it begins operation, he said.

Television Interview

“We’re looking at everybody and talking with everybody,” Li told Bloomberg Television, when asked about possible partnerships with mainland exchanges. The company would seek a balance between cooperation and competition, he said.

The central government announced last year plans to deepen cooperation between the commodity-futures markets in Hong Kong and the mainland, said the Hong Kong government’s Chan, according to a prepared copy of his remarks. The purchase of the LME by HKEx was another step in this direction, Chan said.

Hong Kong Exchanges plans to list iron ore, coking coal and agricultural products in yuan that are settled in cash, a spokesman said last week. The mainland yuan-denominated commodities trade was valued at a combined 95.3 trillion yuan ($15.5 trillion) in 2012, which is confined to three Chinese exchanges that restrict foreigners, according to data from the China Futures Exchange Association.

Setting up LME-registered warehouses in China is a long- term aspiration, Li told reporters today. While the LME has a global network of more than 700 registered warehouses for users to hold metals, there is none in the Chinese mainland.

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