A record number of shares traded on the Hong Kong stock exchange in 2010 after the city completed its biggest year for initial public offerings, and as concern about China’s anti-inflation policies prompted an increase in short-term trading. The total volume of exchange-traded securities, including equities, warrants, options and exchange-traded funds, surged to an all-time high of 34.99 trillion in 2010, according to data from the stock exchange. Average daily trading volume reached a record 140.53 billion securities. That surpassed previous highs set in 2008, with total volume of 27.1 trillion shares, and average daily volume of 110.63 billion. At the same time, the volume of stocks traded on major regional rivals declined from 2009, according to data compiled by Bloomberg. “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 growth in corporate profits would counter China’s steps to curb property- price inflation, Europe’s debt crisis and concern about the pace of the U.S. economic recovery. The Chinese government intensified its fight against inflation by raising banks’ reserve ratio requirements six times, tightening lending rules, and increasing interest rates twice. Other Exchanges Decline Tokyo Stock Exchange saw an average of 2.1 billion domestic shares traded on average per day during 2010, down from 2.3 billion, according to data published on its website. Shanghai’s stock exchange averaged 10.7 billion A and B shares daily, a 22 percent decline from 2009, according to data compiled by Bloomberg. The Korea Exchange in Seoul had an average 379 million shares traded per day in companies on its Kospi Index, down from 484 million, data compiled by Bloomberg show. Hong Kong’s stock market also raised a record amount of equity funds this year, with a total of HK$789.5 billion ($102 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. IPO Pipeline Agricultural Bank of China Ltd., the country’s fourth- biggest bank by market value, conducted part of the world’s largest IPO last year in Hong Kong, with the remainder in Shanghai. Its shares have risen 25 percent from the offer price of HK$3.20 in August. Lorraine Chan, a spokeswoman for the Hong Kong bourse, declined to comment on the outlook for market trading volume for the coming year. The exchange had 39 active applications for initial share offerings as of Dec. 31 and had granted approval in principle to 19 companies during the month, it said in a statement. “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. To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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