Hong Kong’s enduring strengths as an international financial center are well-documented in a report published by the Hong Kong Special Administrative Region’s government titled “Report on Hong Kong’s Business Environment: A Place with Unique Advantages and Unlimited Opportunities”.
The report highlighted that Hong Kong’s financial system remains robust and stable — despite unprecedented challenges including social turmoil and the suppression from Western countries — thanks to the implementation of the National Security Law for Hong Kong last year and the subsequent improvement of the city’s electoral system to ensure “patriots administering Hong Kong” and the successful implementation of the “one country, two systems” principle.
Through it all, the Securities and Futures Commission has contributed toward Hong Kong’s remarkable resiliency to external shocks and resolute efforts at restoring security and stability that put the city firmly back on the path of swift economic recovery and effective governance.
To this end, the SFC has been vigilant to risks and steadfast in maintaining a laser-sharp focus on its core mission: to play a leading role in strengthening Hong Kong’s position as an international financial center and upholding fair and orderly markets in which investors can have full confidence.
With its inherent strengths backed by a sound and robust regulatory regime, Hong Kong’s unique position as the nation’s international financial center can only be enhanced by exciting opportunities from the 14th Five-Year Plan and the Greater Bay Area development and the Comprehensively Deepening the Reform and Opening-up Plan for the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone
The report rightly pointed out a smooth operation of Hong Kong’s financial markets underscored the importance of a stable and secure business environment for international investors to continue to invest and global financial firms to maintain their physical presence. This is further validated by the fresh data below.
The Hong Kong stock market remains as robust as ever. The Hong Kong Stock Exchange recorded an average daily turnover of over HK$160 billion ($20.6 billion) during the 12 months after the enactment of the National Security Law on June 30 last year, an increase of almost 70 percent over the 12 months preceding the enactment of the law. During the same 12-month period, Hong Kong’s stock market capitalization rose 39 percent to almost HK$53 trillion.
Hong Kong continues to rank as one of the top three global IPO destinations in terms of fundraising. Over HK$518 billion was raised during the same period, an increase of 55 percent compared with the 12 months preceding the enactment of the law.
Based upon the SFC’s latest Financial Review of the Securities Industry, the net profits of all licensed brokerages — covering securities dealers and securities margin financiers — in the first half of 2021 totaled HK$36.3 billion, up 22 percent from the previous six-month period, while their total value of transactions and net securities commission income rose 20 percent and 10 percent respectively.
As of June 30, assets under management of 838 SFC-authorized funds rose 9 percent year-on-year to HK$1.56 trillion, while the number of corporations licensed to carry out asset management increased to 1,930. Meanwhile, the asset and wealth management business in Hong Kong recorded a 21 percent year-on-year increase in AUM to nearly HK$35 trillion as at the end of 2020, underscoring Hong Kong’s position as a premier asset and wealth management hub.
The number of licensed firms and individuals operating in Hong Kong has continued to grow. As at the end of August 2021, they increased by about 40 percent and 12 percent respectively compared to five years ago. The total number of SFC licensees reached another historic high of almost 48,000, reflecting Hong Kong’s continued attraction for financial firms and individual practitioners. It is noteworthy that asset managers proposed to engage in hedge funds and private equity business, online fund trading platforms and robo-advising services contributed to a 25 percent increase in new corporate applications for asset management licenses in the first eight months of this year, compared with the same period in 2020. The new applicants included a number of overseas financial institutions from the United States, other countries in North America, Europe and other parts of Asia.
Along the way, the SFC has paid close attention to financial market stability and employed a range of regulatory tools in response to challenges locally and from abroad to avoid disruptions to financial market stability and prevent systemic risks.
Specifically, the SFC closely monitored the market, including brokers’ financial positions, operations and settlements as well as their ability to weather varying market conditions through stress testing and special inspections, as well as keeping a close watch on the potential impact of sanctions on firm operations and on overall market stability.
The SFC also closely monitored the liquidity and redemption profiles of SFC-authorized funds and the daily trading activities on the Hong Kong Stock Exchange and in the over-the-counter derivatives markets to detect potential systemic risk and build-up of excessive risk concentration. It also adopted a zero-tolerance policy against market misconduct that may undermine investor confidence.
Against this backdrop of a stable and secure business environment, Hong Kong is well-placed to seize the opportunities arising from the national 14th Five-Year Plan (2021-25) and the Greater Bay Area development, and “The Plan for Comprehensively Deepening Reform and Opening-up of the Shenzhen-Hong Kong Modern Service Industry Cooperation Zone in Qianhai”.
Indeed, a flurry of recent developments to expand the cross-border mutual market access programs between Hong Kong and the Chinese mainland underscore the unlimited opportunities for Hong Kong as the mainland gradually liberalizes its financial markets.
Following the recent launch of the cross-border Wealth Management Connect program in the Greater Bay Area and of the southbound trading under Bond Connect, HKEX is scheduled to roll out A-share index futures contracts this month, and this new hedging tool will help manage cross-border risk and promote more global, long-term investment in the mainland’s capital market.
With its inherent strengths backed by a sound and robust regulatory regime, Hong Kong’s unique position as the nation’s international financial center can only be enhanced by exciting opportunities from the 14th Five-Year Plan and the Greater Bay Area development and the Comprehensively Deepening the Reform and Opening-up Plan for the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone.
As the HKSAR report suggests, Hong Kong is a place with unique advantages and unlimited opportunities, and our outlook is promising.
The author is the chairman of the Securities and Futures Commission in Hong Kong.
The views do not necessarily reflect those of China Daily.