HKEX-Largest Listed Exchange by Market Capitalisation

On the 06/01/2021, the South China Morning Post reported, with some enthusiasm, that HKEx with a market capitalisation of US$78.8 Billion (todays figure) had displaced perennial heavyweight champ CME (US$74 Billion) and dwarfs its closest listed Asian competitor Japan Exchange (US$13.3 Billion). In fact, HKEx now has a larger market capitalisation than the 7th to 13th largest exchanges combined (Note: SIX Swiss is a calculated market cap), and as early as 2015 the Financial Times had written about HKEx being largest then, but that proved to be a false dawn.

So why is the HKEx as a business valued so highly? Like many exchanges it enjoys a de facto local monopoly but even then the overall value of all its listings is ranked 4th globally at US$6.5 Trillion (01/2021) which is considerably smaller than number 1 NYSE (US$19.3 Trillion), or 2 and 3, NASDAQ and the Shanghai Stock Exchange respectively. 

The answer can be found by examining the make up of the benchmark Hang Seng Index (HSI) which represents 58% of the total HKEx capitalisation with 28 China linked companies now stalwarts of the 50 strong index. These entities give investment access to some of the largest Chinese businesses in Technology, Pharmaceutical, Finance, and Energy, including Tencent, CSPC Pharmaceutical, Ping An Insurance and Sinopec. The days of the HSI having a major British flavour have disappeared into history, and Hong Kong’s own domestic companies unsurprisingly dominate the property sector but little else.

The success of HKEx is listing major China brands, or enticing away them from New York is likely to continue once Jack Ma’s Ant Group obtains re-permission. 

Yet of the top 13 exchanges by market cap by revenues, HKEx sits dead middle of the pack, ranked 7th earning a ‘mere’ US$2.5 Billion year ending 31/12/2020. In comparative terms this is 50% of CME’s revenues, 30% of ICE’s, and 116% greater than the JPX’s earnings.

Notes: All figures produced in this article are in US Dollars are based upon Bloomberg published FX rates on 21/04/2021, Market Caps are as of 21/04/2021 and revenues for year end 31/12/2020



In Summary

HKEx’s mantra ever since 1997 has been a single minded focus on China, even its purchase of the London Metal Exchange had clear China links, by dominating the non-RMB clearing of trades on the Shanghai Futures Exchange, a business expanded through HKEx’s ownership of the Qianhai Mercantile Exchange (QME). The recent large scale success of this strategy and the now large mainland commercial presence of Chinese enterprises across Hong Kong would suggest there is little incentive to change course.

The challenge for HKEx in a post Covid era is how to grow the business further, the HKEx’s bond market is not exactly a hive of activity, and its information services business is small and undeveloped compared to peers. It is highly unlikely in a more protectionist world that HKEx would be accepted as a willing suitor by foreign exchanges.

But that does leave some interesting areas for growth organically, there are 4 businesses areas which HKEx have diversified into:


  1. OTC Clearing, a highly profitable area, but large global clearers are trying to take advantage of more transparent markets
  2. Related post-trade services
  3. Foreign Exchange and Interest Rate Futures trading
  4. Index Futures Trading by attracting MSCI away from the SGX.

The MSCI initiative could well prove to be a masterstroke that underpins HKEx’s number 1 market cap, offering more potential than the other businesses, with the exception of China listings trading and IPOs of course.

Keiren Harris 21/04/2021

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