John Lee, Hong Kong's leader, recently addressed the current economic challenges faced by the city's securities market. He acknowledged the negative impact of China's economic downturn and ongoing global geopolitical tensions on Hong Kong's financial sector. In response, the government is contemplating additional measures to bolster the securities market and restore its vibrancy. This proactive approach aims to counteract the adverse effects that have led to a decline in the city's economic and market performance.
The economic growth in Hong Kong last year was relatively modest, at 3.2%. This slow growth, coupled with significant capital outflows, led to the Hong Kong stock market being labeled as the worst-performing major index globally. This underperformance is a matter of concern, particularly as it has resulted in India surpassing Hong Kong in the value of listed shares. This situation underscores the urgent need for strategic measures to revitalize Hong Kong's financial market and restore investor confidence.
At the inaugural HSBC Global Investment Summit, Lee emphasized the city's commitment to improving its financial market's competitiveness. Already, steps have been taken to refine the listing regime for specialized technology companies, showcasing the government's focus on modernizing and adapting the financial sector to current global trends. However, Lee indicated that there are plans to implement additional measures, which would further improve the transaction mechanisms, investment services, and market promotion, although he stopped short of providing specific details about these plans.
The Hang Seng Index, a key indicator of Hong Kong's stock market health, has experienced a troubling decline. In 2023, the index fell nearly 14%, marking its fourth consecutive year of losses. This downward trend reflects broader economic challenges and underscores the importance of the government's planned measures to revive the market's fortunes and investor confidence.
Hong Kong, a major hub for raising capital globally, has seen a notable decrease in the value of initial public offerings (IPOs). In the first quarter of this year, the value of IPOs fell by 28.5% compared to the same period last year, reaching only $507 million according to data from LSEG, as we read in Reuters. This decrease is a clear indicator of the challenges facing the city's financial sector, particularly in attracting new business and maintaining its position as a leading global financial center.
In response to various economic challenges, including high-interest rates, a complex geopolitical landscape, and increasing budget deficits, the Hong Kong government announced a series of measures in February. These measures are designed to attract capital, businesses, and visitors back to the city, signaling a comprehensive strategy to address the multifaceted economic challenges and revitalize the city's economic health.
Lee expressed optimism about the future of Hong Kong's stock market, citing the measures being implemented. He believes that as these measures begin to take effect, and as the overall macroeconomic environment improves, the stock market in Hong Kong will experience sustainable growth. This confidence is a key message to investors and businesses about the city's potential for economic recovery and long-term stability.
The strategic position of Hong Kong as a primary gateway for investments into mainland China has always been significant. Recognizing this, authorities in both Hong Kong and mainland China have launched several securities trading connect programs in recent years. These programs are designed to enhance investor access to each other's markets, facilitating deeper financial integration and offering more opportunities for cross-border investment.
Paul Chan, Hong Kong's financial secretary, highlighted efforts to persuade mainland China to introduce a new connect program focused on risk management-related financial products. This initiative aims to build upon the existing Stock Connect program, which was launched a decade ago. The new program would offer foreign investors more options for managing risks associated with investing in mainland China, thereby enhancing Hong Kong's appeal as an investment conduit.
The HSBC summit in Hong Kong serves as a significant platform for global financial discourse and networking, particularly important after years of disruption due to COVID-19 restrictions. The summit brings together over 2,000 delegates, showcasing Hong Kong's commitment to reestablishing itself as a major player on the international stage and as a hub for global finance and business.
The timing of the summit is strategic, occurring just after the Rugby Sevens tournament and amid several other high-profile events planned in the city. These events are part of a broader effort to showcase Hong Kong's appeal as a host for international gatherings and to rejuvenate its global image. However, these efforts are occurring against a backdrop of concerns about the city's political and civil liberties, especially following the imposition of a national security law by China in 2020, which has raised international concerns.
The situation in Hong Kong is critically important for HSBC, a global banking giant with a significant presence in the city. Hong Kong is not only a major source of profitability for the bank but also hosts its regional headquarters and a large portion of its share listing. HSBC's reliance on Hong Kong underscores the bank's vested interest in the city's economic stability and success as a financial hub.
HSBC Chairman Mark Tucker expressed his firm belief in Hong Kong's continued role as a global financial center. He emphasized the city's strengths, such as its vast capital markets, the commitment to maintaining the common law system, and the stability provided by the U.S. dollar peg. Tucker's comments reflect a confidence in Hong Kong's fundamental financial infrastructure and its capability to withstand current challenges and retain its status as a major player in the global financial landscape.
08.04.2024
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