Bourses in Brazil and HK leap up global rankings

By Jeremy Grant in London and Justine Lau in Hong Kong
Financial Times
Published: June 15 2009 03:00 Last updated: June 15 2009 03:00
Two of the biggest bourses in Asia and Latin America have for the first time overtaken rivals in New York and London by market capitalisation in a sign of how the economic crisis and tough competition in mature markets is reshaping the global exchange landscape.
Hong Kong Exchanges and Clearing (HKEx) and Brazil's BM&F Bovespahave vaulted ahead of NYSE Euronext, Nasdaq OMX and the London Stock Exchange in the value of shares in the exchange companies themselves.
HKEx is now the world's second-largest exchange by market value, behind CME Group, the largest US futures exchange, while BM&F Bovespa is in fourth place, after Deutsche Börse, the German exchange. The LSE has slipped to 10th place.
The recent stock market rally has boosted volumes at most exchanges. The monthly FTSE Mondo Visione Exchanges Index, released today, shows that the market value of listed exchanges rose by 27 per cent last month. That built on the previous two months' rallies.
Herbie Skeete, managing director of Mondo Visione, said: "Shares of listed exchanges are up across the board from their lows of 2008. Derivatives markets are leading the pack, in part on hopes that US and European regulators plan to regulate over-the-counter derivatives, which could help exchanges."
But the benefits of renewed market confidence have been felt less at the more established exchanges of New York and London. They face stiff competition from alternative trading platforms such as BATS and Direct Edge in the US and Chi-X and Turquoise in Europe.
The Brazilian and Hong Kong exchanges also benefit from ownership of their own houses for clearing trades, which generates added revenues. NYSE Euronext does not own a clearer. Nasdaq OMX will soon launch US equities clearing. The LSE owns an Italian clearing house, but its contribution to group revenues is modest.
BM&F Bovespa has been closing down its trading pits and expanding into electronic trading to make it easier for overseas traders to access the exchange. Next month, the Brazilian bourse opens a London office to attract traders in Europe.
Trading volume on HKEx has surged in recent months because of strong inflows from institutional and retail investors shifting to equities as they seek higher returns. On the back of that, HKEx shares have risen nearly 70 per cent since the beginning of the year, while the benchmark Hang Seng index is up 25.6 per cent.
Michael Chan, analyst at JPMorgan, said: "The driver is really all the money coming in. There has been a strong flow of funds from everywhere, although you can't pinpoint where they come from."