Initiatives to cement HK’s global financial hub status
Hong Kong is set to boost its financial prowess and endeavors in integrating with the nation’s economic development by leveraging the central government’s supportive policies and the Chinese mainland’s vast market, Chief Executive Carrie Lam Cheng Yuet-ngor said in her Policy Address on Wednesday.
The initiatives listed under the segment “New Impetus to the Economy: Integration into the National Development” in her speech reflect the Hong Kong Special Administrative Region Government’s resolve to strengthen the region’s status as an international financial center. They’re also in line with the central government’s expectations of Hong Kong as outlined in the 14th Five-Year Plan (2021-25) for National Economic and Social Development.
Lam said the SAR government will support Hong Kong Exchanges and Clearing in amplifying the bourse operator’s listing regime and its plan to allow special purpose acquisition companies to float in the city after public consultations, which are due to end on Oct 31.
The SPACs listing framework is a well-thought-out initiative as it will provide a more flexible and attractive avenue for mainland startups, as well as unicorns from Southeast Asia, to go public in Hong Kong, said Bruce Pang, head of macro and strategy research at China Renaissance Securities (Hong Kong).
“It will tremendously diversify listed companies and investors in Hong Kong and sharpen our edge in company listings and trading,” he said.
The SPACs proposal has been widely discussed, and the Stock Exchange of Hong Kong published a consultation paper on Sept 17 to collect market feedback. A SPAC is a type of shell company that raises funds through a listing with the aim of acquiring a business within a pre-defined time frame after it has gone public.
As an alternative to making a traditional initial public offering, a SPAC would face lower listing requirements and costs, streamlining the listing procedure with greater flexibility as favored by uninitiated innovation companies, said Pang. “When startups from the mainland and Southeast Asia list in Hong Kong for the first time, the synergy effect in the financial market will attract more companies to follow suit. It’ll further cement the city’s position as a competitive global financial hub.”
Lam also pledged to expand the channels for the two‑way flow of cross-border renminbi funds and develop offshore renminbi products and tools.
The SAR government will look into specific measures to increase demand for the issuance and trading of renminbi securities and allow stocks traded via the southbound trading link under the Stock Connect to be denominated in the renminbi, Lam said.
Pang said such a policy will allow Hong Kong to cater to the demands of investors abroad for high-quality renminbi and equity products. This will not only beef up Hong Kong’s role as an international financial center, but also facilitate renminbi internalization, and clear the way for cross-border investments in financial products, he said.
Terence Chong Tai-leung, executive director of the Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong, believes the policy will lure more wealthy investors from the mainland as it would reduce the risk of losing a fortune due to foreign exchange fluctuations in the process.
Lam also said the government will promote cross‑border financial technologies and actively explore the formation of a one‑stop sandbox network with the mainland to facilitate financial institutions and information and technology companies from Guangdong, Hong Kong and Macao to test cross‑border fintech applications.
A one-stop sandbox network requires a strong economy and technology sophistication, and the Guangdong-Hong Kong-Macao Greater Bay Area is well positioned to experiment with the concept, Pang said.
“If a one-stop sandbox network is set up in the Greater Bay Area, it will mark a step closer to achieving fintech integration in the region,” Chong said.
