Hong Kong to launch new commodities exchange

Hong Kong: Special Administrative Region, Hong Kong, announced plans Wednesday to launch a new commodities exchange that will tap growing raw material demand from China, also the world's second-largest oil consumer. The Hong Kong Mercantile Exchange (HKMEx), as it will be called, will trade US dollar oil contracts when it begins trade in the first quarter of 2009.

The exchange will eventually expand into other commodities trading, the exchange said in a statement.

The fuel oil, which will be stored in the southern territories of mainland China, will be available for delivery on the mainland or overseas. China imported 2.86 million metric tons of fuel oil in May this year, 17 per cent more than last year, according to customs data.

The new exchange will act as a bridge between China and global investors, and give traders access to one of the fastest-growing markets for energy. "There is a huge opportunity for Hong Kong to develop a commodities futures market that can cater to the mainland and we are delighted to see the creation of (a commodities exchange) to accommodate these needs," Hong Kong finance secretary, John C Tsang said in a statement.

The exchange will be chaired by Barry Cheung, former deputy chairman of Titan Petrochemicals Group, an transportation and oil-storage company.

Hong Kong wants to strengthen its position as an Asian trading centre against  rival centres, Tokyo and Singapore that offer commodities trading.

The proposed commodities exchange will be privately owned and will likely have Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Noble Group Ltd as partners, according to Cheung. He also said that the shareholding structure would be decided in a few months.