Recently, we invited Eric Li from Phillip Securities to provide the Selfwealth community with an overview of the ins and outs of the HKEX, as well as key trends and prospects in the Hong Kong stock market.
You can watch the full webinar above, or you can dive deeper into the 10 key learnings below.
Please note that the points below have been slightly edited for clarity.
1. HKEX is more than just a regional stock market
Hong Kong Exchanges and Clearing (HKEX) is a major exchange group and operates a range of equity, commodity, fixed income and currency markets. The HKEX is a leading IPO market and is Hong Kong’s sole securities and derivatives exchange and the sole operator of its clearinghouses, providing regional and international investors with access to Asian markets.
In addition, HKEX is also a leader in metals trading through its wholly owned subsidiaries, the London Metal Exchange (LME), LME Clear and Qianhai Mercantile Exchange (QME) in China.
2. The HKEX has a distinct strategic position in global markets
As a destination market and gateway to China, uniquely positioned at the intersection of Chinese and international capital flows, Hong Kong has long connected China to the world and the world to China. And, with the accelerated opening of Chinese capital markets, HKEX continues to be a pioneer at the forefront of this historic transition, shaping the landscape of global markets.
A wide range of products are traded on the HKEX markets, including stocks, ETFs, REITs, bonds, equity structured products, stock indices and equity derivatives, currency futures and equity derivatives. raw materials.
3. Trade in Hong Kong is booming
The Hong Kong market is currently experiencing strong growth, with average daily turnover (ADT) growth driven by New Chapter companies and HKEX Connect programs.
4. Megatrends are central to HKEX’s vision for the future
HKEX’s vision is to build the market of the future by facilitating two-way capital flows between East and West, using its scale and reputation as a platform to support all stakeholders, by seizing the megatrend opportunities that shape markets and societies.
Key themes for the future development of the HKEX include:
- Connecting international financial markets while preserving continental standards
- Accelerating the internationalization of the RMB
- Raising capital for the new economy and innovative businesses
- New and emerging assets
5. China could represent a “once in a generation” opportunity
China is set to witness a “Big Bang of finance”, with the combined value of China’s bond and equity markets expected to grow from US$31 trillion in 2020 to US$100 trillion by 2030.
The HKEX pursues a number of strategies to support China’s development:
- Develop and improve “Connect” programs
- Become the benchmark offshore risk management center in China
- Cementing its role as China’s preferred offshore fundraising hub
- Develop portfolio of China-related product offerings
6. Hong Kong is a top destination for IPOs
HKEX is a premier capital raising venue for Hong Kong, Mainland China and international issuers. HKEX also acts as the frontline regulator of Hong Kong-listed companies.
It has been a global leader in IPOs and IPO funds raised, ranking number one seven times since 2009.
The main factors driving listings in Hong Kong are:
- HKEX is a true international market
- Trusted regulatory framework
- Efficient and thorough IPO financing platform
- Single Stock Connect platform attracts liquidity
7. The new economy is already transforming the Hong Kong market
The new economy has become the fastest growing industry in Hong Kong. Since the 2018 listing reforms, new economy IPOs have accounted for 65% of total IPO fundraising.
New economy equities and related structured products represent a growing share of average daily turnover (ADT).
Nearly 20 US-listed issuers have applied for their “back” listing in Hong Kong, with an emerging trend favoring dual primary listing over secondary listing.
8. HKEX has established itself as a technology-driven marketplace
In 2021, 17% of cash ADT and 20% of single stock option ADV was contributed by the top 10 IPOs since 2018, and most of them are companies technologies.
With the help of continued American Depository Receipts (ADR) conversions and the migration of exchanges from secondary listings, HKEX has become an emerging technology investment hub.
9. HKEX product range and accessibility continues to improve
Strategic highlights for the HKEX in 2021 included:
- HK SPAC Registration Scheme Overview
- Improved and simplified listing for foreign issuers
- Launch of a suite of new futures and options products covering commodities and indices
- Confirmed launch of the FINI (Fast Interface for New Issuance) platform for the fourth quarter of 2022; reduce the IPO settlement cycle from T+5 to T+2
10. The Hong Kong stock market presents both opportunities and challenges
The future outlook for the Hong Kong stock market can be summarized in four key developments:
- Spot market trading volumes should return to more normalized levels
- The IPO pipeline could remain strong, supported by demand from Chinese companies seeking listings at home and the introduction of the new listing regime for SPACs and foreign issuers
- Ongoing inflationary pressures, monetary policy tightening, upcoming interest rate hikes could cause volatility
- Geopolitical tensions (i.e. foreign corporate liability law, sanctions, entity listing, investment restrictions), ongoing pandemic and travel restrictions will be some of the challenges that will shape the year to come
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