Monday, 22 June 2015

HK connects financial markets

Chief Executive CY Leung

A premier capital formation centre, Hong Kong is one of the world's largest markets for initial public offerings. Last year, our stock market raised $233 billion through IPOs, second globally, just behind the United States.

 

More than 1,700 companies are listed in Hong Kong, including Mainland and overseas companies. They are here because of Hong Kong's market liquidity and our access to global investors. They are here also because Hong Kong offers the combined advantage of "one country" and "two systems". Today, Mainland companies account for more than 60% of our market capitalisation.

 

One of the highlights of the past year must be the preparation for, and then the launch of, Shanghai-Hong Kong Stock Connect. The go-ahead given by the Central Authorities in Beijing amidst the disturbance of Occupy Central is the ultimate proof of their trust and confidence in Hong Kong in the handling of the unprecedented challenge to law and order. I take this opportunity to thank the Central Authorities. I thank also Hong Kong Exchanges & Clearing for working with the Government during the weeks of anxiety before we got the final green light. I remember the many meetings with Chung Kong – CK, and Charles, including one that CK was asked to join in Government House straight from the airport after a long flight from Europe.

 

Groundbreaking connection

Shanghai-Hong Kong Stock Connect has indeed taken our super-connector role to new heights. It is groundbreaking too. It has opened the Mainland stock market as never before. It enhances co-operation between the Hong Kong and Shanghai stock markets by expanding their sources of investment; it also boosts their competitiveness. It proves again that both cities can work together for mutual benefits, and the game is not zero-sum.

 

And there is more. Stock Connect is promoting the gradual opening of the Mainland's capital account and the internationalisation of the renminbi as an investment currency for global investors.

 

Stock Connect has been running smoothly. And it's just the beginning. A similar link with Shenzhen will follow.

 

Global expansion

Just last month, FTSE announced that it would include Mainland A-shares in its global benchmarks. Such a move will enable global investors to gain wide exposure to the A-share market. It will also benefit our financial intermediaries, those who provide services to global investors entering the A-share market through Hong Kong.

 

Mainland connectivity is only part of our strategy. We set our eyes also on market players from the rest of the world. HKEx now owns the London Metal Exchange, LME, in the UK, the world's largest premier base metals market. HKEx now enjoys a global leadership position in base metals futures and options trading through the LME.

 

In April, with the Government's full support, HKEx's four clearing houses were recognised by the European Securities & Markets Authority as third-country central counterparties to offer clearing services to European financial institutions. This ensures that European banks and other financial institutions will continue to participate in our markets. The recognition is also testimony to the high standards of Hong Kong's financial market intermediaries.

 

Beyond Hong Kong's well-established equity and equity derivatives business, our super-connector role extends to the commodities market. Last December, HKEx launched its first Asia commodities futures contracts, referenced to the global reference price of the LME.

 

Hong Kong is in an excellent position to satisfy Asia's appetite for trading in commodity futures, particularly demand driven by the Mainland.

 

Looking ahead, "One Belt, One Road" and the Asian Infrastructure Investment Bank, AIIB, promise us huge opportunities as a fundraising hub and provider of financial services. I'm thinking of international investment, cross-border trade settlement, Renminbi bond issuance, asset and risk management services, corporate treasury services, and more. Hong Kong has a powerful competitive edge in these areas, and we stand to benefit from the grand initiatives of "One Belt, One Road" and AIIB.

 

We will, as well, continue to develop Islamic finance in Hong Kong, given the many Muslim countries along the Belt-Road way. Just last month, the Government successfully offered a second sukuk, with an issuance size of US$1 billion over a tenor of five years. There would be more to come, I believe, when Hong Kong expands its role in Islamic finance.

 

Chief Executive CY Leung gave these remarks at a cocktail reception to celebrate the 15th anniversary of Hong Kong Exchanges & Clearing.


Regards,
Otmane El Rhazi
Department of Commerce
Economic Development
Text/Mobile, +44 7414 782 320

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