China's increasing appetite for capital will play a key role in preserving the status of Hong Kong as a major financial centre and key link to the mainland, according to Hang Seng Bank.
'Attracting more mainland enterprises to list their stock in Hong Kong will add breadth and depth to the territory's stock market and help raise [its] prominent role as a major national funding and services centre for the mainland,' the latest issue of Hang Seng Economic Monthly said.
Chinese companies listed in Hong Kong accounted for 26 per cent of total market capitalisation by the end of last year.
Mainland companies raised HK$443 billion on Hong Kong's capital markets through IPOs and share placements during the past three years, accounting for 72 per cent of all funds raised in that period, according to Hong Kong Exchanges and Clearing.
Since 1993, when the first Chinese state-owned enterprise listed H shares in Hong Kong, 54 H-share companies have listed, raising HK$147 billion by the end of last year. A total of 71 mainland-backed companies, so-called red chips, had raised HK$806 billion through Hong Kong listings by the end of last year, the Hang Seng report said.
The bank suggested Hong Kong markets would falter without the infusion of mainland companies seeking international capital.