Carrie Lam sets Hong Kong up to enhance role as link between China and international financial markets in policy address
- The government’s plans will further consolidate Hong Kong’s unique role in connecting international investors and mainland markets, SFC chief says
- City’s financial regulators set up working group to study the feasibility of promoting the trading of yuan-denominated securities in Hong Kong
The measures outlined by Lam are aimed at boosting Chinese efforts to further open up the mainland markets and the internationalisation of the yuan. Since Hong Kong already has an active stock market and a mature financial system accessed by international investors, the city is ideally placed to improve the links between China and world markets.
Hong Kong’s current listing regime already allows for trading in dual Hong Kong dollar-denominated and yuan-denominated stocks in the city, but such stocks are not actively traded. Shenzhen Investment Holdings Bay Area Development, Hui Xian Reit, 42 exchange-traded funds and 81 debt securities, all of which are denominated in the yuan, are already traded in Hong Kong.
The measured aimed at boosting the use of the yuan in Hong Kong investments has been welcomed by stockbrokers and banks.
“In line with the central government’s policy to internationalise the yuan, it will be helpful for Hong Kong to develop more yuan-denominated products for trading,” said Robert Lee, chairman of the Hong Kong Securities Association.
HSBC, the biggest lender in Europe and Hong Kong, said the new measures would further strengthen Hong Kong’s role as an international yuan trading hub. “The further extension of a yuan product suite in Hong Kong will be well-received by both international and mainland investors and businesses,” said Luanne Lim, the interim CEO for Hong Kong at HSBC.
Mainland Chinese investors currently need to convert their yuan into Hong Kong dollars to trade Hong Kong stocks. The new study will look into helping these investors use the yuan directly to trade stocks in the city.
“What we need to do is educate investors and issuers. It will help to speed up the process, if the southbound stock connect can also invest in yuan share classes of Hong Kong listed stocks,” said King Au King-lun, executive director of the Financial Services Development Council, an industry body.
HKEX signed an agreement with Guangzhou Futures Exchange in August to develop products for both mainland and international investors. Lam said on Wednesday that a potential product for the two bourses could be carbon emissions futures contracts.
Lam also drew attention to listing reforms such as allowing special purpose acquisition companies or blank-cheque companies to go public in the city. HKEX is consulting the market until the end of this month on a listing regime for such companies.
The chief executive also indicated in her policy address that the city would consider offering tax incentives to encourage family offices to set up here. The Hong Kong government will also explore a sandbox with mainland authorities that will allow financial firms in Hong Kong, Macau and the mainland cities in the bay area to test cross-border fintech applications.