On September 23, the Hong Kong Stock Exchange will officially implement arrangements to maintain market operations under severe weather conditions. The Securities Times reporter noticed that the trading arrangements for severe weather have been updated on the official website of the Hong Kong Stock Exchange, showing that 'if the Hong Kong Observatory hoists the number 8 typhoon signal or issues a black rainstorm warning, or when the Hong Kong government declares an 'extreme situation', all products in the stock market and derivatives market will continue trading and operations. If the above severe weather occurs on the trading day of the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, trading on the Stock Connect will also continue.'

A video released by the Hong Kong Stock Exchange shows HKEX Group's Deputy Chief Executive Officer, Jeffrey Yau, saying: 'We are very grateful for the strong support of the SAR government, regulatory authorities, and all market stakeholders for this plan, which is also an important step in promoting the development of the Hong Kong market. In the future, Hong Kong's stock and derivatives market will no longer be delayed or suspended due to typhoons or heavy rain.'

All parties are ready.

Regarding the upcoming implementation of the severe weather trading reform, Angelina Lam, Chairperson of the Hong Kong Association of Banks, stated that the Association has been cooperating with the industry to provide advice for advancing the severe weather trading scheme. 'Our association members are very well prepared. First, Faster Payment System operates 24 hours a day. Many banking services can also be completed electronically. For example, in the event of severe weather, investors can still continue to trade stocks and derivatives products through online banking; bank branches will not be open in severe weather, and investors should also pay attention to the latest check settlement arrangements. Checks deposited one day before a severe weather trading day will be settled as usual, facilitating the transfer of funds for investors and securities brokers.'

Zhao Yinren, head of the Securities Department of the Asian Securities and Financial Markets Association, stated that the ability of the market to operate normally around the clock is one of Hong Kong's important attractions as an international financial center. He said: 'In fact, many brokers and financial services providers are already operating 24 hours a day in different parts of the world. The investor base in the Hong Kong market is increasingly diverse and interconnected with the A-share market. Therefore, it is very important to ensure that the Hong Kong market and the Stock Connect mechanism operate fully on every trading day to support investors in global asset allocation within the region.'

Ding Chen, CEO of Southern Capital Management, mentioned that the Stock Connect has been continuously developing in recent years, attracting more mainland investors to participate in trading Hong Kong stocks and Hong Kong's ETFs. For example, the A-share market will not close due to a typhoon, and if the Hong Kong market is closed, it will bring inconvenience to mainland investors. She said: 'At the same time, there are many funds and products in the Hong Kong market that invest in A-shares. Issuers also need to make daily investments through the Stock Connect. We very much welcome the arrangement to continue trading on typhoon days. It provides fair trading opportunities for investors from both places, and also has a very positive impact on our future product development.'

Christopher Hui, Secretary for Financial Services and the Treasury of Hong Kong, stated that the implementation of the important reform on severe weather trading is a result of the concerted efforts of market participants and stakeholders, eliminating uncertainties in the financial market. He emphasized that after the implementation of this reform, Hong Kong's market will align with international standards, aiming to continuously improve and optimize various trading mechanisms as part of Hong Kong's position as an international financial center, ensuring better connectivity between mainland and overseas capital.

The market has been suspended multiple times due to severe weather conditions.

Just over 10 days ago, due to the impact of Typhoon 'Capricorn', trading on the Hong Kong stock market was suspended all day on September 6.

According to statistics from Hong Kong media, from 2018 to present, severe weather has caused the Hong Kong stock market to suspend trading 12 times, with 4 occurrences in 2023. Last year, after the market closed all day on September 1st due to Typhoon 'Hato' hitting Hong Kong, it closed again all day on September 8th due to a combination of a black rainstorm warning and extreme conditions, totaling two days of market closure in September alone. Wind data shows that in the first 8 months of last year, the daily trading volume of the Hong Kong stock market was 112 billion Hong Kong dollars. Based on this average daily trading volume, the 2-day trading suspension in September resulted in a loss of 224 billion Hong Kong dollars in trading volume.

Currently, the HKEX charges a trading fee of 0.00565% to both buyers and sellers. With an estimated loss of 224 billion Hong Kong dollars in trading volume for Hong Kong stocks, the 2-day market closure leads to an approximate revenue loss of 25 million Hong Kong dollars for the HKEX.

Furthermore, the suspension of trading in Hong Kong not only affects stock and warrants transactions, but also impacts the futures and options markets. With the Shanghai-Hong Kong Stock Connect temporarily suspended, the HKEX cannot earn the required fees from mainland exchanges through the northbound trading, considering the stable trading volume of futures and options within the year and the daily trading scale of tens of billions in northbound trading, the impact of a one-day market closure cannot be underestimated.

As early as last year, the Hong Kong Budget proposed exploring arrangements for the Hong Kong stock market to continue operating in severe weather conditions. Regulatory authorities and the industry have formed a working group to discuss the concept of 'typhoons not causing market closures.'

In June of this year, the Chief Executive of the Hong Kong Special Administrative Region, John Lee Ka-chiu, announced that the HKEX will not suspend trading in adverse weather conditions, with this arrangement taking effect in late September.

At the same time, the HKEX has completed consultations on maintaining market trading in adverse weather conditions and announced the normal market opening arrangements in such conditions. Starting from September 23rd this year, regardless of wind or rain, the Hong Kong market will operate as usual on trading days, and the Shanghai-Hong Kong Stock Connect will also operate normally.

Regarding the arrangements to maintain normal trading in adverse weather conditions, Hong Kong Exchange CEO Charles Li once stated, "Do not underestimate this move, this measure can ensure that investors' risk management plans are not disrupted, allowing trading to continue. This will be a key step in ensuring that we can provide services to investors during trading hours in any weather."

Editor/Lambor