(Yicai Global) May 7 -- The Hong Kong Stock Exchange aims to reach a cooperation with the Guangdong provincial government to establish pilot London Metal Exchange warehouses in the greater bay area as part of efforts to reduce investment risks for traders on China's mainland. 

The facilities that allow warehouse companies to store LME-registered brands of metal on behalf of warrant holders will help to expand the global storage network, Securities Times reported HKEX Chairwoman Laura Cha as saying during LME Asia Week 2019 held at Exchange Square today.

The stock market's Chief Executive Charles Li also mentioned building the metal warehouses at a subsequent meeting, adding that the LME intends to establish a network in China having faced great resistance previously. 

Li believes now is the right time and the bourse is in official talks with Guangdong authorities on building the facilities in pilot zones in the bay area.

Backed by the Chinese mainland market and the development of the area, HKEX needs various links in terms of commodities, Li said, adding the first is the London-Hong Kong Connect and the LME will introduce mini-LME futures contracts in Hong Kong.

The second one is the actuals-futures connect. The HKEX acquired the LME in 2012 and established commodity trading center Qianhai Mercantile Exchange last year. The QME ensures actuals' trading and has pricing power for key metals. These prices can serve as a standard and turn the actuals into futures, Li explained.

Another one is the futures connect scheme. The HKEX hopes to establish contacts with futures exchanges in Shanghai, Dalian, and Zhengzhou and build a pool of funds that allow investors to trade, manage their risks and conduct liquidations in Hong Kong. 

Editor: William Clegg