Hong Kong brokers brace for hard times in 2019, urge regulators to speed up access to Greater Bay Area

Hong Kong’s smaller brokerages have lobbied local regulators to introduce measures that would allow them to broaden their ­market to the 70 million residents in the “Greater Bay Area”.

Christopher Cheung Wah-fung, a lawmaker representing the financial services sector, said such measures were needed to help smaller companies survive.

“The year 2018 was bad, but even tougher times are expected in 2019. The US-China trade war and Brexit have added to market uncertainties. Investors may avoid the stock market in 2019, and it could be tough for small brokers in Hong Kong,” Cheung said in a media briefing.

The Shanghai Composite Index has slumped 24.6 per cent this year, making it the worst- ­performing major gauge worldwide for the second consecutive year. Hong Kong’s benchmark Hang Seng Index is also poised to lose more than 10 per cent this year, with just half a day of trading left today.

Cheung said the Securities and Futures Commission had approved a proposal that would ­allow mainland investors to open accounts online without the need for application in person.

At present, mainlanders who travel to Hong Kong can open an account by visiting the office of a local broker, but the brokerages are not permitted to market directly to them.

Cheung said the regulator had agreed to waive the requirement for face-to-face meetings as long as investors could certify their identification and personal information through an authorised body such as the China Financial Certification Authority.

“Existing customers may refer their mainland friends to sign up as customers. The commission’s latest move will make it easier for brokers to capture mainland customers,” he said.

Cheung has also lobbied to lower the capital requirement to HK$100 million from HK$500 million for Hong Kong firms to enter into the Greater Bay Area.

“The median capital of the more than 500 brokers in Hong Kong is HK$100 million. The ­lower threshold would allow more local brokers to enter into the Greater Bay Area. Smaller ­brokers may choose to combine their resources,” he said.

He said the government and the SFC are also considering increasing the customer compensation cap in the event of a brokerage collapse to HK$500,000 per investor, up from HK$150,000 currently.

“The compensation cap has not been increased for a long time. The increase of the cap could enhance investors’ confidence. The threshold of HK$500,000 is the same as in the case of a bank collapse,” Cheung said.

The number of firms licensed by the commission rose to a record 2,844 in October, a gain of 6 per cent from the preceding 12 months.