Are Hong Kong’s new plans enough to revive the city’s struggling capital markets? An FCC panel of experts shares their opinions
Hong Kong, despite its well-established reputation as a global finance center, fell on the Hang Seng Index for the fourth year in a row in 2023, and also fell just behind its regional competitor Singapore in the 2023 Global Financial Centres Index.
In parallel, the Hong Kong Stock Exchange dropped to tenth place in global IPO rankings in the first quarter of 2024. Some financial experts remain optimistic, while others doubt that new capital markets and investments will be enough to improve the city’s financial future.
To discuss potential solutions to the city’s market issues, the FCC held a panel discussion in early June with Dr. Renu Bhatia, Arnold Ip, Stacey Wong, and Professional Committee Member Richard Winter.
Winter, Senior Advisor of Quam Plus International Finance Limited, opened the discussion by sharing a few positive facts about Hong Kong’s economy.
“We’re very fortunate to be part of China,” he began. “China’s got a growth rate of 5%, which is one of the tops amongst major economies. Hong Kong itself last year grew by 3.3% and this year it’ll be between 2.5-3.5%.”
These statistics have also been widely shared by the Hong Kong government as a testament to the perseverance of the local and mainland economies.
Winter continued, adding that Hong Kong is in a prime location within China’s Greater Bay Area (GBA) with a GDP of 14 trillion RMB — making the region economically equivalent to Italy and Canada.
The GBA also includes Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan, Zhongshan, Jiangmen, Huizhou, Zhaoqing, and Macau — Hong Kong’s neighboring SAR.
Stacey Wong, COO of Quam Plus, also shared an overview of Hong Kong’s financial status, albeit from a critical standpoint. He pointed out the decline in daily turnover from HK$166 billion in 2021 to HK$105 billion in 2023, as well as Hong Kong’s 18% drop in the 2023 Hang Seng Index. Other competitive markets, he mentioned, all increased over the same time period.
Despite these disturbing facts, Wong said that the government’s new measures that were announced in the first quarter of 2024 gave “some hope” to the industry, primarily the April 18th announcement that the Hong Kong Stock Exchange will increase their ties with mainland China’s economy.
Just the next day after this announcement, Hong Kong rebounded by 16,400 points on the Hang Seng Index.
“We are seeing more hope, we are seeing the brighter side of things, but we are still way off our heyday. It’s not enough,” Wong summarized.
On the note of Hong Kong’s “heyday,” Arnold Ip countered the idea of looking backwards, noting that what the city used to do might not be the best solution anymore.
“The market keeps changing,” Ip reminded the panel. “First of all, we have got to recognize that things will keep changing. What we were doing in Hong Kong’s heyday won’t be what we will be doing in 5 years time or 10 years time. It will be very different.”
The fact that more attention has been brought to Hong Kong’s capital market is what Ip finds to be another positive aspect to this situation.
“Everyone is getting together to talk about this subject. This is encouraging,” he added.
The panel also discussed the initial requirements for companies, particularly “pre-revenue” biotech companies that need government and private funding and wish to be listed on the Hong Kong Stock Exchange.
As research and development companies, the panelists — especially Dr. Bhatia — believe that given their unique situation, a separate set of listing requirements should be made for them to make it onto the Main Board.
“This, I think, is a true recognition of the fact that economies are evolving,” she said.
“With the new companies coming through, we need to have a listing regime that allows them to potentially list here without necessarily meeting the same kind of requirements that were initially for the Main Board.”
Circling back to Winter’s initial point that Hong Kong benefits from its close linkage to the mainland economy, Wong admitted that while it is helpful we shouldn’t ignore the geopolitics that also impact the local economy’s performance. To him, Hong Kong should also explore other market links to better its chances of improving.
“We all know that the Chinese economy is not going to come back very soon. The Sino-US geopolitical tension will still continue for a couple of years. So, I believe we need to look at new products,” Wong concluded.
Watch the full talk on our YouTube channel below:
