This July 25, 2019 photo shows the skyline featuring financial buildings including the headquarters of HSBC in Hong Kong. (PAUL YEUNG / BLOOMBERG)
Heavyweights of the Hong Kong finance industry said that they are optimistic about the city’s financial market, but the city cannot be complacent.
Executive Council Member Joseph Yam Chi-kwong said that Hong Kong should leverage opportunities arising from capital connectivity and cross-boundary currency exchanges.
Executive Council Member Joseph Yam Chi-kwong said that Hong Kong should leverage opportunities arising from capital connectivity and cross-boundary currency exchanges
“The function of Hong Kong is to provide channels for mainland investors making overseas investments and attracting overseas capital,” the former chief executive of the Hong Kong Monetary Authority said at a business forum on Monday. “As the Chinese mainland accumulates a huge surplus of international balance of payments in current account, the accumulated capital can go out through Hong Kong.
ALSO READ: HK economy 'poised to recover if global conditions improve'
“Hong Kong can launch pilot programs in the Guangdong-Hong Kong-Macao Greater Bay Area, for example. Hong Kong-based banks can take deposits in the city-cluster area, providing that financial authorities across the boundary can ensure regulatory symmetry and integration.”
Yam also said that the Hong Kong government could propose risk management measures, such as an investment amount quota, to boost the confidence of mainland authorities.
“Hong Kong is underestimated in two aspects. First, the city often is the world’s largest fundraising center in recent years, and second, the city is the world’s most internationalized financial market compared to London and New York because most investors come from overseas countries, whereas most of the fundraising exercises come from mainland companies,” the government’s top adviser said.
At the same business forum, Charles Li Xiaojia, the former chief executive of Hong Kong Exchanges and Clearing, said Hong Kong and the Chinese mainland should develop an “IPO Connect” — allowing Hong Kong and mainland investors to purchase new shares listed in the other’s stock market.
ALSO READ: HK economy shows early signs of revival as exports jump
“The IPO Connect proposal should be complemented by the renminbi counter. When mainland investors can purchase shares of overseas listed companies in renminbi, and then these companies can use the renminbi proceeds from listing to invest in mainland bonds, this enhances overseas investor holdings of mainland bonds and facilitates the outflow of renminbi,” Li said.
In the online meeting of the Legislative Council Panel on Financial Affairs on Monday, HKMA Chief Executive Eddie Yue Wai-man said the Hong Kong dollar is approaching the strong side of convertibility level, buoyed by sustained capital inflows into the city’s fundraising market and Hong Kong-listed shares. Last year, total deposits in Hong Kong’s banking system rose 5.4 percent, whereas Hong Kong dollar deposits jumped 6.2 percent in the same period.
“There is no capital flight out of Hong Kong financial system,” Yue said.
Yue also said that the planned cross-boundary “Wealth Management Connect” — permitting Hong Kong and mainland investors to purchase wealth management products sold in the reciprocal market — is approaching the final stage. The pilot program will first cover those simple and low-risk financial products and then gradually will be extended to insurance products.