Hong Kong Stock Exchange Li Xiaojia: The Hong Kong market is not without shock absorbers and market stabilization measures

Hong Kong Stock Exchange Li Xiaojia: The Hong Kong market is not without shock absorbers and market stabilization measures
Li Xiaojia, chief executive of the Hong Kong Stock Exchange, stated that due to the impact of the new coronary pneumonia epidemic and the macroeconomic environment, the global financial markets have recently undergone huge roller coaster-like changes.In the face of this unprecedented turmoil, worries and panic continue to heat up, and some voices have appeared on the international market to close the exchange market to alleviate and panic.I do not agree with this view. Exchanges can never be closed during periods of market turmoil. Instead, they should maintain fair, orderly and efficient operation of the market more than ever before, because the more this time the role of financial markets in stabilizing the economyThe more important it is.The full text is as follows: Why must the market be kept open First of all, the financial market operated by the exchange is an important channel for many listed companies, market participation and investors to obtain funds.Many companies with great potential need to support future business development through capital market financing, especially in such difficult times. The cash flow may determine the life and death of a company and the countless employees for the development status of the company.Rice bowl.The same is true for enterprises or retail investors who allocate financial assets, especially investors with heavy positions, if they cannot reduce their positions in a timely manner, they may cause cash flow crisis and cannot pay wages or repay mortgages in time.Moreover, the crisis is organic, and the turmoil in the financial market often provides some rational investors with an opportunity to allocate financial assets at a low point.Therefore, the financial market also has the functions of price discovery and risk management. Every moment of market volatility happens to be a process of pricing and releasing risks for uncertainty.Through a transparent game between buyers and sellers, the financial market can guide the flow of funds to the most effective places to support economic development.Especially through derivatives such as futures and budgets, market participants can hedge or arbitrage to manage volatility risks.The free-falling plunge is certainly frightening, but the suspension of market trading can not alleviate this panic or decline. Instead, it will aggravate the market panic and accumulate risks. When the market reopens, it will only usher in a more violent plunge.And panic, this has been verified many times in the international capital markets in the past few decades.Therefore, no matter how the market fluctuates, as an exchange operating agency, we should do our best to ensure the normal operation of the market.Our carefully prepared emergency and “shock absorption” arrangements are currently our first priority to ensure the normal operation of the market, and must be under the protection of the health of employees of the exchange and the intervention of the manufacturing industry.HKEx has always put the safety of employees and the community first.The Hong Kong Stock Exchange has experienced many market turbulences in the past few decades, and has accumulated some experience in dealing with crises. In order to deal with sudden risks, we have established a comprehensive business continuity management program to ensure the continuity of our services andstability.In response to the epidemic, we have taken a series of preventive measures in all operating locations in Asia and the United Kingdom, including remote work, daily masks for employees, temporary travel restrictions and other measures to ensure that all colleagues can be fully protected.In addition, we are also within our ability to help the community fight the epidemic. The Hong Kong Exchange Charity Fund has allocated 10 million Hong Kong dollars to donate to local cooperative organizations and some public welfare organizations to support the fight against the epidemic.In order to reduce crowds and ensure the safety of employees and traders, our respective London Metal Exchanges made a difficult decision to temporarily close live trading in the circle and all turned to electronic trading. This is also the 143 years since the establishment of the London Metal ExchangeClose the live trading in the circle for the second time.Although there is no fuse mechanism, the Hong Kong market is not without “shock absorbers” and market stabilization measures, including the budget night market suspension mechanism and the futures’ down-limit limit trading mechanism. The “shock absorbers” have played a role in a timely manner.In the first two weeks, due to the huge changes in the US stock market, the earnings of our Hang Seng Index, Small Hang Seng Index, Hang Seng China Enterprise Index and Small Hang Seng China Enterprise Index triggered the trading suspension mechanism many times during the night market, and the index futures night market also triggered a rise.Limit limit.In order to ensure that risk management is in place, the Hong Kong Stock Exchange directly monitors the margin level of brokers, adjusts the margin requirements of the derivative product market in accordance with market risks, and adds an additional margin notice within the day, and repeatedly confirms that all market participants meet the new margin requirements in a timely manner.In addition, since 2016, our main index constituent stocks and major derivative products have adopted the market volatility adjustment mechanism (VCM) during the day. The price will automatically “trip” into a 5-minute cooling-off period when the price encounters extreme fluctuations.Calm and calm, the affected products can only be traded within a fixed price limit before normal trading can resume.According to the established plan, we will further expand the scope of application of the market variable adjustment mechanism to cover more products in May this year.We are also preparing to date the pre-opening auction mechanism of the stock market, supplement the existing post-closing auction mechanism, further improve the price discovery function of the stock market and better manage market risk.How to help developing countries overcome difficulties? We also care about employees, and actively respond to manufacturers’ demands to help them cope with the impact of the epidemic.According to the requirements of the “Listing Rules”, 1781 companies listed in Hong Kong must release preliminary results by March 31.Due to the epidemic situation, audit institutions and some listed companies indicated that it was difficult to complete performance audit and release on time.Listed companies postpone the issuance of annual reports and relax requirements for the release of preliminary results.Colleagues in the Listing Division have also been busy contacting listed companies to understand their specific difficulties and provide related advice.We do this to minimize suspensions and disruption to normal trading, while ensuring that the investing public continues to obtain sufficient information to make informed investment decisions.Our stock market financing function has been running smoothly, providing an important financing channel for many companies.In the first two months of this year, Hong Kong’s stock market financing (including new share financing and refinancing) totaled 61.9 billion in financing, an increase of 170% over the same period last year.A total of 24 new shares were listed in Hong Kong in January and February of this year, and the number of listed companies remained basically the same as the same period last year.In a special period, in order to allow companies and investors who cannot participate in the listing ceremony in Hong Kong to feel and share the joy of listing, the Hong Kong Stock Exchange also launched a new “cloud knocking gong” network listing ceremony this week.The video format replaces the on-site listing ceremony of the Financial Assembly Hall.Despite the impact of the epidemic and the inability to conduct face-to-face communication, our colleagues are still actively in contact with companies, market institutions, etc. via telephone, video and other forms.Last week, the Hong Kong Stock Exchange and Shenzhen Stock Exchange completed the first Shenzhen-Hong Kong Stock Connect Online Roadshow. In the future, we will continue to work with internal exchanges to promote interconnection.On Monday, the Hong Kong Stock Exchange and the Shaanxi Provincial Local Financial Supervisory Authority established an online course on the theme of introducing Hong Kong ‘s capital market to build an interactive platform for companies and capital market listing service agencies, and provide assistance for the capital market to serve the development of the real economy.In addition, the Hong Kong Stock Exchange has also actively participated in online listing seminars organized by many industry organizations, so that the industry can keep abreast of the latest developments in the Hong Kong stock market.Thanks to the joint efforts of exchange colleagues and developing countries, Hong Kong’s financial market has been operating smoothly and efficiently during the epidemic period, once again highlighting the replacement of the Hong Kong market.In particular, the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and Bond Connect are operating steadily, and transactions have reached new highs.The balancing effect has hedged some market volatility risks.Will this world be better tomorrow?There is no doubt that this epidemic has brought an unprecedented impact on the lives of all people, and at present no one can predict how this crisis will evolve.Each of us has more or less many long-term problems or concerns, for example: How much continuous and how much economic cost do we need to control the epidemic globally?In order to prevent the spread of the epidemic, how long will the social isolation policy adopted by the countries and the economic “pause” button clicked on last?Considering the current huge volatility and sluggish market confidence, how likely is the liquidity crisis in the coming weeks?The epidemic severely hits the economy, coupled with the high leverage effect of the international financial market, how likely is a financial crisis?Can unprecedented monetary and fiscal bailout measures effectively restore confidence and liquidity?As global market structures become more and more complex, they also become more and more interrelated and derivative. In this context, how can we ensure that capital markets can effectively perform their most basic functions (such as raising funds, price discovery andRisk management) without amplifying risk and transition?. Frankly speaking, I don’t know the answers to these questions.But I know that we will do our best to use all of our available knowledge, experience and tools to make the most informed decisions.Numerous economic theories and practices have proven many times that an efficient capital market can play the role of raising funds, price discovery and risk management, and has always played a role in supporting economic stability.Therefore, at such a difficult time, we will definitely eliminate all difficulties and stick to our positions to ensure the normal operation of Hong Kong, an international financial center.At such a difficult time, I am particularly proud of the hard work of the various teams of the Hong Kong Stock Exchange and thank you for your contribution to the Hong Kong market.I am especially grateful to the frontline staff such as doctors, nurses, drivers, and cleaners who insist on guarding every morning. Each of you is a hero fighting on the frontline of epidemic prevention. Because of your hard work, our society can function normally.The road ahead must be rugged, but I firmly believe that after the wind and rain is a rainbow, as long as we are united and fighting the epidemic together, we will definitely overcome the virus and walk out of this storm, and we will definitely see a gorgeous rainbow.The market will be stronger than ever, at least!Editor Li Weijia

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