The Year 2005 in Review. The Year 2005 in Review STOCK MARKET

Transcription

1 The Year 2005 in Review Against the background of a buoyant economy, the HKEx securities and derivatives markets set new records in The total market capitalization of the securities market (including the Main Board and the Growth Enterprise Market (GEM)) set a record of HK$8,260.3 billion on 21 December 2005, surpassing the 2004 record of HK$6,695.9 billion. As at the end of 2005, Hong Kong ranked the 8th by market capitalization among members of the World Federation of Exchanges 1. The annual market turnover also reached a new high of HK$4,520.4 billion in 2005, a 14% increase from A total of 67 companies newly listed on the Main Board and GEM in 2005, raising a total of HK$165.7 billion. At the end of 2005, the Hang Seng Index (HSI) closed at 14,876 points, representing a yearly increase of 5%. The Hang Seng China Enterprises Index (H-shares index) rose by 12% to 5,330 points in the year, while the Hang Seng China-Affiliated Corporations Index (the red-chip index) surged by 24% to 1,935 points. The average daily turnover of the Main Board in 2005 was HK$18.2 billion, up 15% from that in The S&P/HKEx GEM Index closed at 1,007 points at the end of year, representing a year-on-year increase of 2%. The GEM average daily turnover in 2005 was HK$90.43 million, a 13% decrease from the pervious year. The derivatives market also recorded its most active year with an annual volume of 25,523,007 contracts in 2005, a 30% increase from The average daily derivatives turnover was 103,332 contracts (54,386 contracts in futures and 48,946 contracts in options), representing a year-on-year increase of 31%. STOCK MARKET Market development Listing The year saw continued progress in listing-related reform initiatives. In January, the Financial Services and Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) each published a consultation paper on certain legislative proposals to enhance the regulation of listed companies, in particular to introduce statutory backing for major listing requirements. In February, HKEx published a consultation paper on establishing a new listing decision-making structure. The proposed new structure comprises a Listing Policy Committee, a Listing Decisions Panel, a Listing Review Panel, an Adjudicator and a Disciplinary Review Penal. Public consultation revealed support for the direction of the reform. Initiatives were also undertaken by the SFC to facilitate the listing process. It released in August a consultation paper on possible reforms to the prospectus regime in which a unified offering regime for all regulated investments is proposed. The paper also proposed greater liability for sponsors and underwriters in respect of the information disclosed in prospectuses. In June the SFC released a consultation paper proposing specific entry criteria and ongoing compliance requirements for sponsors. 1 World Federation of Exchanges Monthly Statistics January HKEx Fact Book 2005

2 Regulatory changes were made by the SFC which would facilitate the development of real estate investment trusts (REITs) in Hong Kong. Authorized collective investment schemes are allowed to invest in REITs listed on any stock exchange, and geographical restrictions on overseas investments by authorized REITs are lifted. The first REIT Link REIT was listed in Hong Kong in November and raised HK$21.6 billion, the world s largest REIT so far. Progress was made towards a purely web-based news dissemination regime, as is already adopted for GEM. In November HKEx released an exposure paper proposing that Main Board issuers publish only a short-form announcement in the newspapers and post the full version on HKEx s website and the issuer s own website. Trading, clearing and settlement In 2005, enhancements were made to secondary market services and regulations. HKEx further enhanced its stock trading systems and parameters. It upgraded the capacity of the Third Generation Automatic Order Matching and Execution System (AMS/3) and completed the Phase I roll-out of SDNet the next generation telecommunication network integrating HKEx s securities and derivatives systems. Phase I involved the integration of the derivatives trading and clearing systems and data services system. In July, HKEx reduced the minimum trading spreads for shares above HK$30 from the previous range of HK$0.1 to HK$2.5 to a new range of HK$0.05 to HK$5. The maximum number of outstanding orders per price queue in AMS/3 was increased from 2,000 to 4,000, effective on 21 November The securities clearing house, Hong Kong Securities Clearing Company Limited (HKSCC), introduced improvements to its money settlement services and nominee services. These included a greater use of the Real Time Gross Settlement (RTGS) system and fee reduction. The suspension and re-instatement mechanism for the investor compensation levies came into effect on 28 October Under the mechanism, the levy can be suspended when the net asset value (NAV) of the Investor Compensation Fund (ICF) exceeds HK$1.4 billion and subsequently reinstated when the NAV of the ICF falls below HK$1 billion. Accordingly, securities and futures trading investor compensation levies have been suspended since 19 December In the light of heavy investor interest in the derivative warrants market, in November 2005, the SFC proposed a six-point plan to improve the market. The plan involves tightening requirements for liquidity providers, speeding up further issues of derivative warrants, banning commission rebate schemes, publishing new marketing guidelines, requiring plain language listing documents, and providing more investor education. Main Board Equities The year saw the listing in Hong Kong of the first China-incorporated commercial bank Bank of Communications (the fifth largest lender in Mainland China by assets), and the first Mainland China state-owned commercial bank China Construction Bank. The latter raised over HK$71.5 billion and was the ever largest IPO in Hong Kong. 2 HKEx Fact Book 2005

3 At the end of 2005, there were 934 listed companies on the Main Board versus 892 in Among them, 80 companies were H share companies and 86 were red chips, with a year-end market capitalization of HK$1,280.5 billion and HK$1,710.0 billion respectively. Fifty-seven companies newly listed on the Main Board in 2005 (9 were H share companies), raising a total of HK$165.0 billion of new capital. As at the end of 2005, total market capitalization of the Main Board was HK$8,113.3 billion against HK$6,629.2 billion in The benchmark HSI was up 5% from a year ago, closing the year 2005 at 14,876 points. Mainland-related stocks had significant year-on-year increases 12% for the Hang Seng China Enterprises Index and 24% for the Hang Seng China-Affiliated Corporations Index. The S&P/HKEx LargeCap Index grew 8% year-on-year to 17,025 points. The Hang Seng Composite Index closed at 1,947 points, increased by 6% over the previous year. While the utilities sector and the commerce and industry sector of HSI rose 4% and 17% respectively, the finance sector dropped 6% and the properties sector dropped 1%. Main Board equities recorded a total turnover of HK$3,587.6 billion, up 6% when compared with Main Board Warrants The number of newly listed derivative warrants reached a record high of 1,682 in 2005, compared with 1,259 in Together with the 12 equity warrants issued in the year, the amount raised by newly issued warrants was HK$154.9 billion. Active warrant trading maintained Hong Kong s position as the world s most active warrant market in The total turnover value of derivative and equity warrants was HK$858.9 billion, up 63% from the previous year. As at the end of 2005, there were 27 equity warrants and 1,304 derivative warrants listed. Main Board Debt securities There were 166 debt securities listed as at the end of 2005, with a turnover of HK$10.50 million, (a year-on-year decrease of 75%). The number of newly listed debt securities in the year was 32, raising HK$60.86 billion, a 42% decrease over a year earlier. Main Board Unit trusts and mutual funds In June, the market saw the listing of the first bond Exchange Traded Fund (ETF), ABF Hong Kong Bond Index Fund. In addition to ETFs, the listing of REITs in November and December further activated the sector. Three REITs were newly listed in They raised more than HK$25.8 billion and in just over a month s time had a total turnover value of HK$30.9 billion. At the end of 2005, there were a total of 13 unit trusts/mutual funds listed comparing with 10 in Six of them were newly listed (including the REITs), raising HK$35.2 billion. The total turnover value in the year was HK$51.6 billion, more than double the 2004 figure. 2 World Federation of Exchanges Monthly Statistics January HKEx Fact Book 2005

4 Main Board Equity Linked Instruments (ELI) The ELI market contracted substantially in 2005, with only HK$1.02 million turnover value comparing with HK$ million in There were no new issues of ELIs during the year and no ELI was listed at the end of Growth Enterprise Market (GEM) There were 201 listed companies on GEM as at the end of 2005 comparing to 204 in Among them, 40 were H share companies with a year-end market capitalization of HK$6.4 billion. The total market capitalisation of GEM was HK$66.6 billion, similar to the HK$66.7 billion in The number of new listings on GEM was 10 (3 were H share companies), raising a total HK$ million of new capital. The total turnover value in 2005 was HK$22.3 billion, a 13% decrease from the previous year. Trading-only market As at the end of 2005, two ishares and seven Nasdaq stocks were quoted on the trading-only market. Trading on the market was thin, with a turnover of HK$17.09 million in 2005 compared to HK$32.82 million in DERIVATIVES MARKET Market development HKEx further strengthened its derivatives market by introducing new measures and products in On 1 February 2005 new measures were introduced to further develop the stock options market. The measures included assigning two market makers to provide continuous quotations in selected stock option classes, tariff reduction and narrowing strike intervals. As a result, the number of stock options series expanded to more than 3,000. On 23 May 2005, futures and options of the FTSE/Xinhua China 25 Index, which tracks the performance of 25 largest and most liquid Hong Kong-listed Mainland enterprises, commenced trading. On the other hand, the trading of Dow Jones Industrial Average Futures was suspended from 25 January 2005 due to low market demand. Trading activities In 2005, the HKEx derivatives market reached new highs. The total trading volume of futures and options was 25,523,007 contracts, 30% more than the 2004 historical peak. The trading volumes in the HSI futures and options, Mini-HSI futures, H-shares Index futures and options and stock options all reached new records. The newly launched FTSE/Xinhua China 25 Index futures and options registered a turnover of 2,882 contracts and 7,386 contracts respectively. Among all futures products, the largest volume contributor HSI futures (contributing 73% of total futures volume) recorded the largest annual turnover increase of 15% to 9,910,565 contracts in Its total open interest was 98,211 contracts at the end of The turnover of Mini-HSI futures increased by 3% to 1,501,342 contracts in 2005, and that of the H-shares Index futures grew by 14% to 1,978,673 contracts. 4 HKEx Fact Book 2005

5 The number of stock futures classes expanded from 36 in 2004 to 42, but the annual trading volume decreased by 24% to 13,069 contracts. Trading for the year in the non-equity derivative products contracted too the 1-month HIBOR futures decreased by 66% to 246 contracts, the 3-month HIBOR futures decreased by 57% to 24,935 contracts, and the 3-year Exchange Fund Note futures decreased by 44% to 1,250 contracts. Stock options contributed 72% of total options contract volume in At the end of 2005, the number of stock option classes expanded to 43 with an open interest of 1,021,913 contracts, comparing to 37 classes and an open interest of 684,052 contracts in The trading volume surged to 8,722,393 contracts in 2005, representing a year-on-year increase of 55%. The total premium for 2005 was HK$10.4 billion compared with HK$5.6 billion in The second biggest volume contributor in the options market HSI options registered a year-on-year increase of 51% in volume to 3,071,822 contracts in The turnover of Mini-HSI options recorded an increase of 14% to 30,595 contracts. H-shares Index options recorded a volume of 257,425 contracts for the year comparing to 77,758 contracts during the around 6 months trading in 2004 since its launch on 14 June HKEx Fact Book 2005