To stay aggressive as a number one worldwide monetary hub, Hong Kong can now not depend on the formulation of its previous ‘wonderful’ days however do one thing new, in keeping with audio system on the Hong Kong Overseas Correspondents’ Membership (FCC) in June.
“What we have been doing in Hong Kong’s heyday gained’t be what we can be doing in 5 years’ time or 10 years’ time. It is going to be very totally different. Can we predict what we can be doing? It is vitally tough,” stated Arnold Ip at a FCC seminar on June 6.
“We have to adapt. I do not know how the subsequent 5 years will evolve. What I do know for positive is that what we can be doing within the medium time period can be fairly totally different from the Nineties, the noughties or the final decade,” stated Ip, the chief chairman of Altus Holdings, an funding holding firm listed on Hong Kong’s Progress Enterprise Market (GEM).
“What we have to do with a view to adapt is to really to maintain an open thoughts. No matter reform we come up…we have to consider all of the stakeholders available in the market, not simply the fund managers, not simply the businesses, not simply the retail buyers however everyone,” Ip stated.
Hong Kong is altering and adaptation to this actuality is arguably going to be key as competitors ramps up elesewhere in capital markets.
“What’s over, for my part, is the imagery that many nonetheless cling to in trying to the way forward for a prideful metropolis – Asia’s world metropolis, Milton Friedman’s favorite free market. The Hong Kong of previous will not be the Hong Kong of right now, and particularly not the Hong Kong of tomorrow. The title of my article [for the Financial Times] was meant as a wake-up name, an enchantment for you in Hong Kong to come back to grips with this seemingly harsh realisation,” stated Stephen Roach, a senior fellow on the Paul Tsai China Middle of the Yale Legislation Faculty., additionally on the FCC June occasion.
IPO ache
Hong Kong has fallen a lot from its glory days. In 2018 and 2019, town was the world’s blargest preliminary public providing (IPO) market, however plunged to tenth place in 2023. Whole IPO fundraising in Hong Kong was HK$46.3 billion ($5.93 billion) in 2023, a year-on-year lower of 56%, in keeping with a PwC report on January 2. PwC expects that complete funds raised in IPOs for the complete 12 months of 2024 in Hong Kong will rebound and attain between HK$70-80 billion, with the primary half of the 12 months, complete funds raised on the Hong Kong market reaching HK$13.1 billion – a 27% drop year-on-year.
The Dangle Seng Index dropped by greater than half from 30,644.73 on February 19, 2021 to 14,863.06 on October 29, 2022, beneath its peak in 1997, the 12 months when Hong Kong was handed by the UK to China. The Dangle Seng Index rebounded to 18,176.34 on June 11, though it has since dropped to 17,002 as of July 30. As compared, the Nasdaq-100 surged 55.1% in 2023, its greatest efficiency since 1999, whereas the S&P 500 rose 26.3%.
“My premise is that with out a rebound within the mainland Chinese language financial system, Hong Kong is unlikely to spring again to life by itself. That’s as a result of the linkages between the PRC and Hong Kong economies have develop into tighter than ever,” stated Roach, who was previously the Asia head of Morgan Stanley based mostly in Hong Kong.
Over the previous 12 years, 2012 to 2023, the Chinese language financial system grew by a median of 6.3% yearly; that was a 3.7 proportion level deceleration from the spectacular 10% tempo of the previous thirty-two years from 1980 to 2011, Roach identified. Progress within the Hong Kong financial system has additionally decelerated by 3.7 proportion factors, slowing from a median 5.1% tempo over 1980 to 2011 to only 1.4% from 2012 to 2023, Roach added.
2024 is predicted to see between 2.5% to three.5% GDP development, albeit partly because of the post-pandemic restoration, and a reduce in rates of interest from the US Fed, probably beginning in September, ought to assist the Hong Kong greenback develop into a extra aggressive forex. The Q2 2024 GDP preliminary estimate is 3.3% helped by a lift in exports. A flagship itemizing resembling from Hong Kong-heaquartered life insurer FWD may additionally assist revive the IPO market this 12 months.
In search of international listings
“We’ve relied an excessive amount of on China. We have to look to the area,” stated Stacey Wong, president of the Affiliation of Hong Kong Capital Market Practitioners Restricted, on the FCC seminar.
The Chinese language financial system will not be going to revive quickly, whereas Sino-US tensions are going to proceed for 2 extra years at the very least, predicted Wong, who can be chief working officer of Quam Plus Worldwide Fund, a Hong Kong-listed monetary companies group. “So we have to take a look at new merchandise,” argued Wong.
The brand new merchandise Hong Kong can provide embody abroad Renminbi merchandise, Wong advised. The latest reappointment of Eddie Yue as chief govt of the Hong Kong Financial Authority by Hong Kong’s monetary secretary for an additional 5 years cited the significance of Hong Kong as an offshore Rmb hub.
The Hong Kong Inventory Trade (HKEX) has been doing lots of work in visiting Cambodia, Indonesia and Malaysia in an effort to draw firms in these international locations to listing in Hong Kong, stated Wong. “Nevertheless it takes time for them to come back.”
“The trade has been extraordinarily proactive whether or not it’s going to the Center East and whether or not it’s visiting international locations within the area,” stated Renu Bhatia, chairman of the itemizing committee of the HKEX, on the FCC seminar.
Ip learnt from a latest journey to Southeast Asia (SE Asia) that many Malaysian firms wish to Hong Kong’s capital market.
Indonesia, Vietnam and Philippines are thrilling markets the place firms want to boost capital, stated Richard Winter, a senior advisor of Quam Plus Worldwide Monetary, on the FCC seminar. Hong Kong can create a brand new market to boost funds for these regional firms, advised Winter, who can be a member of the Hong Kong Securities and Futures Fee (SFC) Takeovers and Mergers Panel.
Bilateral commerce between Hong Kong and Asean reached $144.6 billion final 12 months and this week the Hong Kong authorities visited Laos and signed 12 memoranda of understanding throughout the delegation’s go to, indluding throughout monetary serives and commerce.
Overseas firms discover Hong Kong costly as a venue to listing with uncertainty on whether or not they can efficiently listing, Ip identified. “These are the issues we have to tackle. As soon as we are able to tackle these issues, Hong Kong will come again.”
Governments will attempt to persuade firms of their international locations to boost funds of their international locations, so the HKEX must look into what’s going to persuade firms in these international locations to faucet the Hong Kong capital market, stated Wong.
The HKEX can provide secondary listings for bigger international firms that are already listed of their international locations, stated Bhatia. If a international agency will get into the Dangle Seng Index, the agency can have the likelihood to get into Inventory Join, then mainland Chinese language buyers should buy these firms’ Hong Kong shares via Inventory Join, stated Bhatia. “That’s one large profit they’ve.”
With extra reporting from Andrew Tjaardstra. The story has been up to date to incorporate the Q2 2024 GDP figures.
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