Hong Kong Pushes for Financial Markets to Remain Open During Typhoons

Hong Kong’s government is taking steps to address the issue of market closures during typhoons by urging a task force to devise a viable plan within weeks. The group, consisting of officials from the stock exchange, regulators, and local financial institutions, has been given a timeline for their proposal following a perceived lack of progress in previous discussions.

The urgency stems from recent market shutdowns due to a typhoon and rainstorm, which occurred on consecutive Fridays last month. Recognizing the detrimental impact on Hong Kong’s revenue and its reputation as a financial centre, the government seeks to bring an end to the city’s outlier status among major financial centre, the government seeks to bring an end to the city’s outlier status among major financial centres that frequently halt trading during extreme weather.

The pandemic-induced shift towards remote work has highlighted the antiquated nature of market closures. Additionally, as climate change contributes to an increase in extreme weather events, the inconvenience of such halts is expected to rise. Recognizing this, HKEX and regulatory bodies are actively exploring severe weather trading arrangements to enhance the attractiveness of Hong Kong’s markets.

The Securities and Futures Commission has emphasized the benefits of enabling trading during severe weather for the entire city. Likewise, the Hong Kong Monetary Authority is supportive and collaboratively working with the government, the exchange, the SFC, and the banking industry to develop a comprehensive proposal.

The timing of the task force’s plan is crucial, as Chief Executive John Lee is expected to address the issue in his upcoming annual policy address on Oct. 25. Overcoming certain challenges, such as ensuring margin obligations to HKEX, remains a key consideration. One potential solution under discussion involves the government of the Hong Kong Monetary Authority guaranteeing margin payments up to a certain level.

Hong Kong, which typically experiences about six typhoons annually from June to October, aims to strike a balance between safety measures and maintaining the functionality of its financial markets. By addressing this issue, Hong Kong seeks to strengthen its position as a resilient and attractive financial hub in the face of changing market dynamics and extreme weather events.