IPOs, concerns over policies provided boost to short-term trading volume

HONG KONG - A record number of shares were traded on the Hong Kong stock exchange in 2010.

That came after the city completed its biggest year for initial public offerings (IPOs), and as concern about anti-inflation policies in the Chinese mainland prompted an increase in short-term trading.

The total volume of exchange-traded securities surged to an all-time high of 34.99 trillion shares in 2010, according to data from the stock exchange.

Average daily trading volume reached a record 140.53 billion shares. That surpassed the previous highs set in 2008, with total volume of 27.1 trillion shares, and an average daily volume of 110.63 billion.

"We've had big IPOs that draw money to this region and generate sizable fund flows," said Steven Leung, director of institutional sales at UOB-Kay Hian Ltd. "The year's characteristic is that short-term trading dominated. The index wasn't up much. Policy-related stocks had huge short-term volatility."

The benchmark Hang Seng Index climbed 5.3 percent last year, following a 52 percent rally in 2009, on speculation that growth in corporate profits would counter the Chinese mainland's steps to curb property-price inflation, Europe's debt crisis and concern about the pace of the US economic recovery. The government intensified its fight against inflation by raising banks' reserve ratio requirements six times, tightening lending rules, and increasing interest rates twice.

The city's stock market also raised a record amount of equity funds this year, with a total of HK$789.5 billion ($101.2 billion), among which HK$412.2 billion was raised in initial public offerings, according to data provided by Hong Kong Exchanges & Clearing Ltd. AIA Group Ltd's $20.5 billion IPO in October was the largest in the city's history.

Lorraine Chan, a spokeswoman for the Hong Kong bourse, declined to comment on the outlook for market trading volume for the coming year.

"Even though in 2011 there may not be IPOs of the size of AIA's, there's prospects of more money coming to Asia for the high-growth story here," UOB-Kay Hian's Leung said.

Bloomberg News