Beijing’s support aside, Hong Kong must shine as a financial hub

The central government may have stepped in to defend markets but Hong Kong needs to show its ability to fend off regional challengers, such as by tapping its Middle East and belt and road connections

Ken Chu

Published: 7:30pm, 29 Jan, 2024

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Over the past two years, Hong Kong’s stock and initial public offering markets have underperformed compared to global peers. Last week, the Hang Seng Index plunged below the psychological 15,000-point mark, sending jitters across the market.

Naysayers and those hostile to the mainland authorities and Hong Kong administration seized on the opportunity to peddle the story of a doomsday market crash. This has echoes of the “demise of Hong Kong” narrative painted by some before the 1997 handover. Fortunately, as has always been the case, the central government’s cavalry rode to the rescue.

After Beijing announced that it would lower the reserve requirement ratio for commercial banks and cut the relending and rediscount rate for some bank loans, the Hang Seng Index halted its fall and actually bounced back. This was yet another affirmation of my strong belief in the resilience of Hong Kong’s stock market and economy, especially after 1997 with the added, steadfast support of the central government.

We should not be swayed by rumours. Fluctuations in stock indices are normal, and there is no need to panic over every ebb and flow of the market. In other words, we should not be misled or deluded into believing that a market collapse is imminent unless there is concrete evidence to confirm a systemic downtrend and unstoppable downwards spiral.

Furthermore, Hong Kong will always have a ready buttress in the motherland. The China factor is here to stay and will continue to play a key role in our financial arena, as it has always done, as well as in our economy. We ought to have confidence that the central government will stand ready to throw us a lifeline.

Nonetheless, Hong Kong, as a premier financial hub, has to continue to empower and transform itself to fend off tough competition, especially from some new kids on the block such as Jakarta and Mumbai. We cannot rely solely on the central government to offer endless material support to shore up our financial industry. It is time that we showed Beijing and the world our ability and commitment to rise to the challenges and defend our status as a leading international financial hub.

Given that the central government has unswervingly pledged, in the 14th five-year plan, to support Hong Kong to enhance its strategic position as an international financial centre, the city can and should forge ahead, not only in consolidating its position but also in expanding its scale and portfolio.

Hong Kong already has the elements essential for an international financial hub. These include the rule of law, a good network of prominent financial institutions, a large pool of professionals, well-oiled communications, and a financial infrastructure attuned to well-practised international standards.

Besides, we now also have our strong, close connections to the financial markets of mainland China – something that our competitors do not have. Any international investment fund seeking exposure to the market of China, the world’s second-largest economy, would certainly choose Hong Kong, a market that is also mature and aligned with the prevailing international rules and systems. At the very least, Hong Kong is obviously a preferred choice in the region.

That said, I am convinced Hong Kong’s financial industry needs to continue to explore new markets, new opportunities and new products. Potential new markets and partners can be found in the Gulf region, for example, but we must step up our efforts to engage with the various sovereign wealth funds there, to persuade them to invest in our financial markets and products, as well as encourage major Arab companies to list on our stock exchange.

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Hong Kong leader John Lee sees commercial opportunities with Middle East countries

Hong Kong’s stock exchange could perhaps look into the possibility of creating a board that is tailor-made for Middle Eastern enterprises and equity funds that have to comply with sharia principles, in addition to our regular listing rules. Another huge opportunity lies in the Belt and Road Initiative’s corridor between Asia and the Middle East.

Several oil-rich countries can be found along the corridor and all need infrastructure capital and green funds. To promote Hong Kong as a hub of capital, city officials could seek the endorsement of the central government to establish a permanent Belt and Road Initiative office in Hong Kong that is devoted to infrastructure and green equity matters.

At a recent forum, Financial Secretary Paul Chan Mo-po revealed the latest measures taken by the People’s Bank of China to expand the connectivity between Hong Kong and the mainland, further highlighting Beijing’s commitment to support the city as a global financial hub.

In a more divided world, ‘superconnector’ Hong Kong must get creative

In the coming years, we can certainly rely on the central government to back us up, especially in the face of the changing geopolitical environment that is well beyond our control, yet influences our market.

Like many others, I see a possible negative factor on the horizon that may well disrupt our market and economy. I am of course referring to the US presidential election, in which hawkish former president Donald Trump could defeat the incumbent Joe Biden. We might just have to hold our breath for the time being.

Ken Chu is group chairman and CEO of Mission Hills Group and a national committee member of the Chinese People’s Political Consultative Conference