The early months of the trading link between the Hong Kong Stock Exchange and the Shanghai Stock Exchange have been characterised by strong northbound investment flows. And APX’s Wang is working to generate similarly buoyant demand for Chinese firms, albeit amongst a distinctly antipodean customer base.Wang, chairman and CEO of Sydney-based financial services firm AIMS Financial Group, acquired the Australia Pacific Exchange in 2008 and relaunched it as a ‘bridge’ between Chinese and Australian issuers and investors in March 2014. APX’s current focus is to bring Chinese firms to the attention of Australian investors, with the eventual goal of also facilitating Chinese investment in all stocks listed on APX – Australian or Chinese.
Shanghai-Hong Kong Stock Connect isn’t the only route for Chinese investment bearing the weight of expectation in 2015, according to George Wang, deputy chairman of the Asia Pacific Stock Exchange (APX).
“There is still a big gap between Australia and China,” says Wang. “We want to bridge that gap.”
Central to APX’s business plan is Wang’s argument that Sydney can become a renminbi hub that offers a different value proposition from the international financial centres much closer to the Chinese mainland, such as Hong Kong and Singapore. For Chinese issuers, Australia offers opportunities for expansion within a similar time zone, reaching a large, sophisticated, western investment community, notably the superannuation funds that need to expand their horizons, but which have become notoriously reluctant to invest internationally. APX might also offer an outlet for the frustration caused by Chinese market regulators’ stop-start approach to the domestic IPO market.“Australia is a strong financial centre through which Chinese firms can reach an international and western investor base within their own region. These firms are now sufficiently mature to attract Australian investors,” Wang observes. “The big ‘super’ funds have historically tended to invest locally, in part to minimise risk. But experience tells me that while Australian investors are conservative, once they understand a stock, they tend to stick with it.”
Deepening financial ties between the two countries, adds Wang – born in Hainan province but an Australian passport-holder for more than 20 years – are further underpinned by growing trade links, built on agriculture and resources. Last November, the Australian and Chinese governments announced a free trade agreement to reduce tariffs on a wide range of imports and exports, across a variety of sectors, including finance.
In March, APX will start live trading on a new technology platform, X-stream, provided by Nasdaq, which also supplies trading systems to the Australian Securities Exchange (ASX) and the Singapore Exchange. Connectivity is provided by IRESS, the Australian financial systems vendor, and trades will be processed via the ASX’s clearing and settlement capabilities, at least while the moratorium on post-trade competition persists.“It was important to choose a system that was convenient for brokers,” says Wang. “We’ve completed the majority of the testing with brokers and IRESS and we’re now ready to go live on 9 March.”
APX issued a consultation paper in January on its proposed listing rules for mining, oil and gas stocks, which follows an agreement between the Sydney exchange and the Beijing Mining Exchange to develop a joint platform to help mining companies conduct cross-border financing and mergers and acquisitions.
Importantly for APX’s strategy, Nasdaq X-Stream will provide APX will multi-asset class and multi-currency trading capabilities.
“Renminbi trading is the key for us,” asserts Wang. “Over time, we want Chinese and other Asian investors to invest in Australian-listed stocks, so we need to allow people to trade in both currencies. We working very hard on the launch of renminbi-denominated trading, but it’s too early to commit to a starting date.”
As trading on the new Nasdaq platform commences, the two firms already listed on APX – Australia Samly, a distributor of healthcare products, and ZhongHuanYun Holdings, a packaging and logistics solutions firm – will be joined by a third, Australia Santia Jinnai Culture Development Holdings, a purveyor of Chao embroidery.
“Australian firms have enquired about listing too, but at this stage we are keen to differentiate ourselves from the ASX and so are concentrating our energies on bringing our pipeline of Chinese firms onto APX,” Wang explains.