The mutual stock market access between the Chinese mainland and Hong Kong (the Stock Connect) has been expanded to include eligible exchange-traded funds (ETFs), allowing Hong Kong and foreign investors to trade ETFs listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange, and those from the mainland to invest in Hong Kong-listed ETFs, thus enhancing Hong Kong’s role as the mainland’s offshore capital hub.
More specifically, the ETF Connect allows global investors to tap 83 exchange-traded funds on the mainland — 53 in Shanghai, 30 in Shenzhen — via accounts held in Hong Kong, an opening that may attract up to 200 billion yuan ($28.5 billion) of investments within one to two years, according to a forecast by China Asset Management.
In addition to that, according to a joint statement by the financial and monetary regulators of the mainland and Hong Kong, a Swap Connect for global investors to hedge the risks of 3.7 trillion yuan of offshore bonds held by them will be established. The swap is expected to debut at the end of 2022 at the earliest, with interest rate swaps for users to exchange one stream of future interest payments for another.
The Stock Connect was first launched in November 2014. Trading began on the Connect first in the Shanghai and Hong Kong exchanges. Shenzhen joined two years later. In 2017, the Bond Connect was launched. And, in September 2021, the Cross-boundary Wealth Management Connect Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area was launched.
Hong Kong’s new links with mainland’s financial markets will definitely not only strengthen Hong Kong’s position within the GBA, but will also strengthen its role as a world-leading financial center
The Stock Connect program is now considered a great success, and mainland investors, according to market data, are currently contributing to around 10 percent of daily stock transactions on the Hong Kong Stock Exchange.
Actually, Hong Kong’s stock market has more than tripled. HKEX is currently betting that more mainland companies will list in Hong Kong, and that mainland companies forced off US bourses will shift to the city.
This comes as part of the mainland’s continuous efforts to open its financial markets, but also as part of the country’s bet on the Greater Bay Area and Hong Kong’s role in it as one of the world’s most important financial centers.
As I mentioned in some of my latest articles, Hong Kong undoubtedly remains one of the most important financial centers in the world, and offers many opportunities not only to mainland companies, but to companies from all over the world. According to the World Competitiveness Yearbook 2022, published by the International Institute for Management Development on June 15, Hong Kong was ranked the fifth-most competitive place in the world, up from seventh in 2021.
Hong Kong is as resilient as ever despite the pandemic and despite the social unrest prior to the pandemic, remaining one of the most important financial centers in the world. Undoubtedly, things have certainly been complicated in Hong Kong these last three years. Since 2019, the city has faced unprecedented economic challenges. As we all know, despite Hong Kong being in great shape in 2017 and 2018, the economic situation worsened afterward, as 2019 and 2020 were two of its most challenging years socially and economically because of the monthslong social unrest and the COVID-19 pandemic, and early 2022 proved to be very challenging again, this time because of the pandemic’s fifth wave in Hong Kong, which, unlike the previous waves, ravaged the city, disrupting normal activities and unfortunately causing many infections and deaths.
There is a clear international acknowledgement of Hong Kong’s role as one of the most important financial hubs in the world, a financial hub that does not seem only to maintain its position, but to enhance its position year after year, as long as it gradually opens up.
Hong Kong is currently involved in many projects that will not only help it maintain its status as one of the world’s most important financial centers, but also enhance it, such as the Guangdong-Hong Kong-Macao Greater Bay Area development. In the country’s 14th Five-Year Plan (2021-25), the central government again recognizes Hong Kong’s potential at the national level and has reaffirmed its commitment to support the Hong Kong Special Administrative Region in strengthening its status as an international financial, trade and logistics hub.
In this current situation, Hong Kong needs to grasp any opportunity to secure its financial dominance, and one of these opportunities comes from the Stock Connect programs. Hong Kong’s new links with mainland’s financial markets will definitely not only strengthen Hong Kong’s position within the GBA, but will also strengthen its role as a world-leading financial center.
Hong Kong’s new links with mainland’s financial markets will definitely not only strengthen Hong Kong’s position within the GBA, but will also strengthen its role as a world-leading financial center.
The views do not necessarily reflect those of China Daily.