♠ Posted by Emmanuel in Technology at 10/18/2010 04:26:00 PMAs the cliche goes, it turns out that Shanghai is literally eating Hong Kong's lunch. If you've been to the former crown colony, you are undoubtedly familiar with the sight of financial services industry traders having power lunches at the many fine dining establishments there. But--ha, ha--it turns out that their habit of splurging on elaborate meals may be numbered. Just like Her Majesty's reign for you royalists out there, all good things must come to an end. With hungrier, harder working traders in Shanghai willing to trade for more hours for less, the competition is getting quite intense between HK and mainland traders. Will the Shanghai bourse eat the Hong Kong Stock Exchange alive? It's not a sure-fire possibility right now, but hey, it's good to have someone to keep you on your toes, wherever you are. From Bloomberg:
Equities traders in Hong Kong may soon have to say goodbye to lunches of sautéed ostrich and crispy pigeon at Michelin-starred restaurants and settle for a sandwich at their desks instead.And yes, the rationale is to keep Hong Kong trading hourse in sync with other international bourses like the one in Shanghai to ensure that reaction time is not dulled in response to breaking news and data:
Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Charles Li wants to cut in half the two-hour break, the longest of the world’s 20 largest bourses, to bring trading in line with China’s financial markets. Bankers like Alex Wong say the break is useful for meeting clients and attending presentations. “One hour just isn’t enough,” said Wong, asset-management director at Ample Capital Ltd., whose lunch haunts include the Golden Leaf at the Conrad Hotel and restaurants at the Four Seasons, Shangri-La and Marriott. “The time will have gone by the time I’ve walked out of the office -- waiting for the elevator alone could take 10 minutes during lunch.”
The difference in trading hours gives traders in Shanghai and Shenzhen a head start over Hong Kong investors in reacting to market news, said Li. Mainland companies accounted for 47 percent of the HK$19.69 trillion ($2.5 trillion) market value of Hong Kong’s Main Board on Sept. 30, exchange data shows, up from 16 percent in 1997, when the U.K. returned Hong Kong to China.
Chinese and Hong Kong markets trade for four hours daily. Shanghai’s trading hours run from 9:30 a.m. to 3 p.m. with a 90- minute break between 11:30 a.m. and 1 p.m. Hong Kong runs from 10 a.m. to 4 p.m. with a two-hour break from 12:30 p.m. Li proposed Hong Kong starts trading half an hour earlier, with a 1-hour or 1 ½-hour break at noon, keeping the close at 4 p.m. -- increasing daily trading by up to 90 minutes.
“His thinking is more on how to get Hong Kong to become an international market for international players, rather than catering to investors who are already based in Hong Kong,” said Pauline Dan, chief investment officer at Samsung Investment Trust, which oversees about $78 billion in assets. “That time is when we can make the best use for lunch presentations and meetings. One hour definitely isn’t enough.”Aside from traders using new media to keep in touch with home base outside of the office or trading floor, dining establishments are getting used to serving (faster if less expensive) dim sum as opposed to elaborate multi-course meals. Interestingly, there are also plans afoot to add RMB-denominated issues:
The two-hour lunch break, in place since the stock exchange was formed in 1986, harks back to a slower pace of life during colonial days, said Francis Lun, general manager at Fulbright Securities Ltd. “Back in the colonial days, those expatriate bankers -- super emperors -- had to live an easy life,” he said. “They couldn’t take things too quickly.”
Li invited brokers and investors at the Hong Kong exchange to respond to a consultation paper on the change in hours by Oct. 29. On the London Stock Exchange there hasn’t been a lunchtime trading break since at least 1950, spokesman Jonny Blostone said, while New York had lost the luxury of a lunch hiatus by 1887.
Frankfurt, Paris and London open for more than 8 hours daily, while New York trades for 6 1/2 hours. Singapore is proposing to boost its hours to eight from 6 1/2 by also cutting its lunch break. Tokyo is considering increasing trading to more than 6 hours from 4 ½.
Hong Kong’s brokers have battled to keep their long lunch in the past. Seven years ago the exchange withdrew an attempt to shorten the lunch break amid opposition from traders. “I’d only have time to hop downstairs,” said Castor Pang, research director at Cinda International Holdings Ltd., who uses his lunchtimes for meetings or to attend company presentations. “Lunches at the Landmark Mandarin Oriental would be history.”
Many in the finance industry support Li’s proposal, pointing out the business advantages of trading at the same time as mainland bourses. “I can foresee more new products, including bond, fund, insurance products, and listed securities by companies, followed by arbitrage activities,” said Benson Chan, chief executive officer of CASH Financial Services Group Ltd. in Hong Kong. “If trading hours in Hong Kong and the mainland don’t overlap, it would be difficult for such arbitrage.”
Chan pointed out that some of his firm’s brokers already trade for their clients from outside the exchange via mobile devices such as netbooks and Apple Inc. iPads. “At the end of the day, these are just a change of habit,” he said.Another shrimp dumpling for you? I guess there won't always be an England in Hong Kong as its gaze shifts more from its colonial past to its special administrative region present and future.
Or a change of menu, suggests Susanna Lo, the Conrad’s marketing and communications manager. “A lot of traders like to dine with us,” she said, suggesting that customers pressed for time might opt to switch to dim sum instead of a three-course meal with main dishes like sautéed ostrich or roasted whole crispy pigeon.
At Liberty Exchange Kitchen and Bar in Two Exchange Square, a two-minute walk from the trading floor, manager Paul Tai is preparing for the possible change in hours. “If you put yourself into their shoes, you’d realize one hour just isn’t enough, not just for the brokers, but lawyers or accountants who work closely with them,” said Tai. “Probably more people will order takeout or delivery.”
Hong Kong-based shareholder activist David Webb said the city’s long lunch break causes a loss of trading business from European investors as they start their working day. According to a survey of almost 600 responses on his website, only 19 percent want to keep the two-hour break, while more than half think it should be done away with altogether. “Just go for a single 9:30 a.m.-4 p.m. session,” Webb said. “An increasing amount of retail broking takes place online anyway and computers don’t need to shut down for lunch.”
Hong Kong Exchanges said in its three-year strategic plan released in March, the first under Li’s stewardship, that it plans to become a primary channel for investing by Chinese nationals overseas. The plan also proposed new products such as yuan-denominated bonds.
“As Hong Kong and the exchange move to have more renminbi- denominated instruments, it’s only logical that trading times align more closely to the mainland,” said Gavin Parry, managing director of Parry International Trading Ltd. “Shortening the market lunch break is another piece of the old-school brokers life that is being dragged into modern times.”