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Hong Kong to implement investor identification requirement early September

Hong Kong Exchanges & Clearing Ltd. CEO Charles Li said the operator of the city's stock exchange plans to launch an identification program Sept. 10 for all investors who trade Shanghai and Shenzhen-listed stocks from Hong Kong through the mutual market access schemes.

The plan, which applies only to Hong Kong-based investors trading through the stock connect schemes, will bring Hong Kong in line with requirements in the mainland, where individual investors must register with their real names and identification card numbers to discourage market speculation and manipulation.

Li said during first-half earnings briefing Aug. 9 that the bourse will need to resolve some technical issues before the launch. Li did not elaborate on what the technical issues were.

Earlier in June, a senior Chinese securities regulator urged the Hong Kong bourse to enhance regulatory cooperation with mainland exchanges, including introducing investor identification requirements. According to a November 2017 proposal by the Hong Kong stock exchange, the bourse aimed to launch the identification program for Hong Kong-based investors in the third quarter of 2018. The move is to improve market monitoring and surveillance, the proposal added.

The Hong Kong bourse will also continue to work on strengthening connectivity with mainland exchanges in terms of money flow and financial products, Li said.

Hong Kong Exchanges & Clearing's trading income from the stock connect schemes totaled HK$365 million in the first-half, up 125% from a year ago. The Shanghai link was launched in 2014 while the Shenzhen one followed two years later.

The company's net profit jumped 44% year over year to HK$5.04 billion in the first-half due to higher trading, clearing and listing fees.

Challenging second-half expected

Li added that he expects a more challenging second-half in terms of securities trading, after July's monthly turnover fell to HK1.88 trillion from HK$2.16 trillion in June.

"Right now the market seems to be at a loss as to where [it] will go and I think this [uncertainty] will continue," he said, noting that the lower turnover may be offset by higher trading activity in derivative products as a result of volatility caused by global trade tensions.

In the long term, Li said the bourse is interested in acquiring foreign exchanges to enhance "international connectivity" as it aims to develop into a global listing center for biotech companies.

The exchange revised listing rules in April to attract IPOs from both biotech entities that do not have revenue or profit, and companies with shareholding structures that feature weighted voting rights.

Li also said the bourse has taken a pole position worldwide in terms of IPO fundraising, ahead of the New York Stock Exchange and Nasdaq, after raking in HK$187 billion so far in 2018 through large flotations such as those of China Tower Corp. Ltd., BeiGene Ltd. and Xiaomi Corp.