Paul Chan: Despite Unrest, Hong Kong’s Financial Market Hits New Milestone
The social turmoil lasting for almost six months has severely damaged Hong Kong’s economy and disrupted people’s livelihood. Yet we are fortunate to say that limited impact has been seen in the local financial market, which has been operating smoothly and orderly so far. Just last week, I witnessed the secondary listing of the first leading tech company with weighted voting rights structure in Hong Kong, Alibaba. This is also an important milestone in Hong Kong’s capital market.
The rise of emerging enterprises has triggered fundamental changes to business models, and has gradually reshaped the development of enterprises. The rapid growth of tech enterprises has brought huge demand to the financing market. Against this background, we reformed the listing regime in April last year to allow emerging and innovative companies with weighted voting rights structure, as well as and pre-revenue or pre-profit biotechnology enterprises, to list in Hong Kong, and facilitate tech companies listed in other international markets to come to Hong Kong for secondary listing.
It is under this framework that Alibaba came to the Hong Kong market for its secondary listing. The exercise raised about $90 billion, making it the third largest one in Hong Kong, and has helped Hong Kong to climb up the IPO league table with total IPO raised amounting to $280 billion so far this year.
The effect of last year's amendment of the listing regime is gradually shown, and it has brought new impetus to the Hong Kong stock market. So far, three tech enterprises with weighted voting rights structure and 11 biotechnology companies have been listed in Hong Kong. Their market value in total exceeds $ 5.1 trillion, accounting for 14% of the total market capitalization. If Tencent (which was listed in Hong Kong in earlier years) is included, the total market value of all tech enterprises would exceed $8 trillion, accounting for more than one-fifth of the total market capitalization. This has increased Hong Kong’s attractiveness to innovative companies and investors, and further enhanced the breadth, depth and vitality of Hong Kong’s stock market. At present, the total market capitalization of Hong Kong’s stock market is around $36 trillion. We are confident that there will be considerable growth in the future.
The competitive edge and development of the Hong Kong financial market today are the result of years of joint efforts and continuous improvement by market stakeholders and the government. Looking back, the process in reforming Hong Kong's listing regime was not straightforward. There were different views in the market when the listing issue of companies with weighted voting rights structure was discussed. Since the current term government took office, I have gauged and considered comments from different stakeholders. Taking into account the need to enhance Hong Kong market’s competitiveness while ensuring that investors’ interests and rights are protected, we rolled out the reform swiftly after consulting stakeholders.
After more than a year, the reform has achieved some success. The listing of leading tech companies in Hong Kong would encourage more companies in the same sector to follow suit. And with the development of the area into an international innovation and technology center under the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area) development plan, it is expected that the area will become a cluster of innovation and tech companies in future. Apart from assisting in the I&T research in the Greater Bay Area, Hong Kong can also continue to contribute as an international financial center and serve as the mainland’s gateway to international funding. Hong Kong can support the growth and development of innovation and tech companies through IPO and post-listing financing, including angel investments, private equity funds and venture capital funds required during different development stages of the companies. Hong Kong is the second largest private equity market in Asia. As of the middle of last year, the value of assets managed by private equity funds amounts to some $152 billion. In addition to funding support, these private equity funds often bring in management and operation experiences and consolidate the ecological chain required for technological innovation, business development, and financing.
Hong Kong's financial services industry continues to develop well and maintains its momentum. It is one of the pillars of our economy, accounting for nearly 20% of our GDP. However, we must keep in mind that the financial market is highly competitive and volatile, and funds and talent have high mobility. To sustain the strengths and competitiveness of Hong Kong, we must work on both market development and supervision. Along this thinking, we have consolidated our strengths and developed new competitive edges in different areas of finance services, such as providing financial support for companies issuing bonds or green bonds in Hong Kong, providing tax incentives for aircraft leasing, corporate treasury centers and captive insurance companies. In the future, we will continue to make an effort to further enhance the competitive advantage of Hong Kong's financial services industry and contribute to Hong Kong's economic development.
Paul Chan Mo-po is the financial secretary of Hong Kong. This article was first published on Hong Kong’s government website.
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