HKeX signs deal aimed at LME Asia warehouse expansion

Hong Kong Exchanges and Clearing (HKeX) has signed a preliminary deal with China Merchant Group companies aimed at expanding London Metal Exchange warehouses in Asia and developing new products and services for the Asian market.

HKeX has been under pressure to boost earnings ever since it bought the London Metal Exchange (LME) in 2012 for $2.2 billion. To this end, it has long planned to steer the LME into mainland China, the world's biggest metals market.

HKeX representatives, including Chief Executive Charles Li, are in London this week for LME Week, the global metals industry's largest annual gathering. The deal or MoU (memorandum of understanding) was signed on Wednesday with China Merchants Group (CMG) and China Merchants Securities (CMS).

"This agreement ... marks the beginning of our collaboration in exploring initiatives such as LME warehousing in Asia and the development of new renminbi-denominated products," said Matthew Chamberlain, the LME's head of business development.

The LME, the world's largest marketplace for trading base metals derivatives, recently raised trading fees and launched its own clearing house in a bid to boost profits. But those moves are a sideshow compared with HKEx's plans for the LME to capture the massive metals market in mainland China.

The new deal with CMG has a "particular focus on examining the feasibility of establishing LME listed warehouses" in China, said Yu Liming, executive vice president of CMG.