13 September 2023
For many years now, Hong Kong has been seen as a bridge between the East and the West, attracting substantial international investment and listing a growing number of Chinese companies. While the focus is quite rightly on the Hong Kong Stock Exchange, Hong Kong is a central financial hub in many different areas.
We will now look at the array of different investment markets across Hong Kong and the growing influence locally and globally.
As mentioned above, the Hong Kong Stock Exchange (HKEX) has been a leading market for some time, but this influence and global reach have increased dramatically in recent years. Through the Stock Connect program, not only can investors buy shares in Chinese companies, but Chinese companies can now raise capital via international investors.
The initial success of the Stock Connect program prompted the authorities to widen the scope and reduce the eligibility criteria. This should also significantly impact liquidity, which is a critical part of any new and growing market.
Hong Kong has a robust and liquid property market, and even during the pandemic, it managed to maintain its position as the most expensive housing market in the world. In 2021, property in Hong Kong was valued at a staggering 23 times median income. While property prices have been volatile in recent times, the limited amount of housing stock available is, to a certain degree, supporting prices.
The Hong Kong authorities have been highly active in the bond and fixed-income market, although there is also strong interest in corporate and municipal bonds. Growing demand for ESG and environmentally friendly investments has encouraged the issue of hundreds of millions of dollars of so-called "green bonds". This is an area where the Hong Kong authorities are relatively strong and, in many ways, leading the way.
Trading in ETFs has increased dramatically in the US, and this pattern has been replicated in Hong Kong. While the majority of ETFs are based on equities, bonds and commodities, there have been recent developments in areas such as cryptocurrencies. Introducing a structured, some may say investor-friendly, regulatory framework has made Hong Kong one of the leading global lights for cryptocurrency trading. This is a perfect example of the innovative nature of the regulatory authorities and local investors' appetite.
While the above markets are often seen as the more prominent trading facilities in Hong Kong, it is vital to recognise the array of other options available, such as:
· Currency Exchange
· Derivatives Market
· Commodities Market
· Private Equity
· Venture Capital
· Hedge Funds
· Private Banking and Wealth Management
· Real Estate Investment Trusts (REITs)
· Insurance and Annuities
· Art and Collectibles
· Islamic Finance
· Digital Assets
· Alternative Investments
While the UK has been a financial leader for many years, it is interesting to compare and contrast the power and influence of Hong Kong not only in the Far East but on a global basis. The vast range of trading opportunities is impressive, especially considering that Hong Kong is over 200 times smaller than the United Kingdom.
Hong Kong financial markets may not be equal in size to the UK or boast the same level of international appeal. Still, when you consider the size of the city, the number of financial markets available is mighty impressive.Back to News