16 November 2022
Historically, Far East markets have been a hotbed of innovation and new technology in an ever-changing world. This has allowed investors in the region to tap into new exciting markets, and adapt and restructure existing sectors, often attracting massive inflows from overseas. While the interconnection of international markets has removed some of the competitive edge, is innovation still alive and kicking in the Far East?
China has one of the world's largest economies, and there has been increasing demand for direct access to Chinese investment. Historically, access to Chinese stock markets has been limited for overseas investors. However, now that Hong Kong has been brought back into the fold, this has opened up an array of opportunities for domestic and international investors.
The "Connect" trading system between Hong Kong and China allows leading Chinese companies to create secondary listings on the Hong Kong stock market. This, in turn, enables overseas investors to effectively invest directly in Chinese companies. On the flip side, this has also created a new investment channel for Chinese companies looking to raise funds and expand overseas. This innovation has been a game-changer for investors and Chinese companies alike. There are plans to extend the "Connect" trading system and increase liquidity which will help all parties.
Over the last few years, retail and institutional investors have pressured companies to improve their environmental/climate-related credentials. Consequently, these often ignored measures are now considered by many institutions when looking at new investments. This has prompted both listed andunlisted companies to improve their environmental credentials and take a more widespread look at their operations.
We have also seen the recent emergence of carbon credit trading facilities in Singapore and Hong Kong. These two historically competitive countries often go toe to toe concerning new and emerging technologies and asset classes. This has benefited investors and the underlying causes, such as climate change challenges. While several carbon credit trading platforms have come and gone in years gone by, some attracting fraud concerns, the competitive relationship between Hong Kong and Singapore has created a tighter regulatory environment.
The Hong Kong SFC authorised investment in crypto assets only four years ago, but this was restricted to professional investors. However, recent comments from the SFC suggest that the restriction on retail investors will soon be lifted, authorising direct investment in crypto EFTs. This could be a game changer for the Far Eastern markets, creating more interest and focus on crypto assets. Many believe this will see the sector eventually regulated by the SFC, but this could still be some way off.
Currently, the SFC is undertaking a degree of indirect regulation by authorising ETFs that invest in Bitcoin and Ether futures traded on the Chicago Mercantile Exchange. Eventually, other crypto assets will likely be added to the mix in what many see as a significant step forward for the sector.
While new technology and the interconnection of global stock markets may have temporarily impeded the competitive edge of the Far East, innovation is still alive and kicking. We have seen significant developments in climate-related services and crypto assets. The competitive relationship between Hong Kong and Singapore markets has undoubtedly benefited the region and encouraged a proactive approach to new investment/technology. Long may it continue!Back to News