HKEX Insight

What is Hong Kong’s future role as an International Financial Centre (IFC)?

Hong Kong’s core role, at the interface between Mainland China and the World, remains and is perhaps more needed and more vital than it has ever been.

The depth, breadth, diversity and opportunity that define Hong Kong as an IFC are part of its DNA. And as much as these have shaped its past, so will they shape its future.

What is exciting, is that the path ahead is opening as we speak because we are starting a new chapter in Hong Kong’s connect story with a clear and opportunity-rich future as a leading IFC.

Now, we are at the start of a new chapter.

Starting in July this year, a number of fundamental and game-changing developments have begun to unfold.

First, was the inclusion of ETFs in Stock Connect and the announcement of a new Swap Connect in July.

This was then followed by Stock Connect trading calendar enhancements in August; and then three further significant developments were announced in September, which – when implemented – have the potential to radically again redefine regional – and global – markets.

These three new initiatives have the potential to include Hong Kong-listed international companies, significantly increase the number of eligible stocks on Stock Connect, add RMB trading counters to Hong Kong Stock Connect and offer Treasury bond futures in Hong Kong.

The details of these new initiatives are still to be fully defined but they will have significant implications. In essence, these breakthrough initiatives amount to an effort to strengthen connectivity between China and the world, with Hong Kong playing a crucial role.

The proposed inclusion of international companies in Southbound Stock Connect, in particular, is a potential game changer because – for the first time – it will allow retail investors from the Mainland to buy international stocks in Hong Kong, which will make Hong Kong’s listing platform much more attractive to potential international issuers.

The proposed inclusion of international companies offers great strategic significance to both Mainland and Hong Kong because it means that Mainland regulators want Hong Kong to play a bigger role in promoting financial recoupling, this in turn will further strengthen Hong Kong’s position as a global fund-raising hub, provide Mainland investors with a wider range of investment options and grow liquidity in Hong Kong’s markets. The circle becomes virtuous: the market becomes richer, deeper and more liquid.

The inclusion of ETFs in Stock Connect creates opportunities for both mainland and international investors and adding ETFs to the southbound channel underlines Hong Kong’s importance in supporting Mainland China investors’ demand for exposure to the latest economic and financial trends in global markets.

The proposed launch of Swap Connect and Treasury Bond futures will give international investors unique risk management tools for China’s bond markets. International investors are increasingly active in onshore China fixed income and are demanding a wider range of risk management tools, particularly amid recent market volatility.

All these initiatives and enhancements are foundational in bringing the China growth story to international investors, promoting the internationalisation of the RMB and supporting Chinese capital in accessing global opportunities.

Together they realise the huge opportunity from the Big Bang of Finance – a process where reforms, connectivity innovations and capital flows will increase the size of China’s capital markets to more than US$100 trillion in the next decade or so.

These developments will only serve to make Hong Kong’s superconnector status ever greater and more vital. HKEX’s role as China's preferred offshore fund-raising centre will be strengthened, our position as China’s go-to offshore risk management centre will be enhanced and we will gain further traction as we leverage and expand our China–related product offering.

These developments are great news for Hong Kong’s markets; but we are not complacent.

At HKEX we are surrounded by immense opportunity. But where there is opportunity there is competition. It will be up to us and our community in Hong Kong and our partners across the region, to work together to shape our shared successful and sustainable future. We need to fully grasp the opportunities ahead.   

And if not now, then when?

We have a dedicated and passionate team at HKEX and a clear strategy. We are committed to working with our clients and our full suite of valued stakeholders to deliver success not only for ourselves, but for them too. Our eyes are on the long-term.

We have much more to do to realise our key goal of growing liquidity and velocity in our markets and delivering on our vision to build the Marketplace of the Future: this is not just a simple destination but rather a mindset and an ambition and a vision that builds on our existing strengths. We want to create a business and a market that our regional and global customers and stakeholders want to be part of.

As the world’s centre of gravity pivots East, we are focused on securing our place as an international exchange leader, fully aligned with our stakeholders’ needs and leveraging our strength as a global superconnector.

We are doing this by focusing on our unique China expertise and access; diversifying our business to connect capital with ideas; and actively embracing the trends and dynamism that are shaping our industry.

The Marketplace of the Future will offer our customers and stakeholders a real-time, highly automated, intuitive, digitally-enabled experience, all provided in a cost competitive way.

It will support traditional and new asset classes, offering greater choice and opportunity, whilst at the same time never wavering on its commitment to resiliency, efficiency and innovation.

Our vision is underpinned by a steadfast, purpose-driven organisation, where ambitious, empowered, collaborative colleagues are resolutely focused on the long-term sustainable future of both our markets and our community. 

We are building the Marketplace of the Future for the prosperity of all.

A new and exciting chapter is unfolding for Hong Kong, and we are at the heart of it.