Green bonds, fintech keys for Hong Kong to retain financial hub status
Despite the dire warning by ratings agencies about Hong Kong’s economic outlook, bankers and the city’s top finance official are upbeat on its advantages as a fundraising and yuan trading centre.
“The global cost of the transition to a low-carbon economy is estimated at US$93 trillion between now and 2030. China alone estimates that it needs 2 trillion yuan, or US$350 billion, over the lifetime of the 13th Five Year Plan to meet its targets, with US$77 billion needed purely to tackle air pollution. Financing this change requires a switch from bank finance to bond finance,” Gulliver said on Friday at a forum on Hong Kong’s status as an international financial centre.
“The first green corporate bond issued by a Chinese company was hosted here in Hong Kong already provides a considerable advantage in marketing Hong Kong’s strengths. And whilst other centres are gaining a reputation for green bond issuance, particularly London, they lack the proximity and the market access of Hong Kong. ”
Gulliver said another driving force for Hong Kong would be the internationalisation of the yuan. The city, he pointed out, has 1 trillion yuan and has been acting as a hub for issuing dim sum bonds and other yuan products.
“As part of the world’s next great conurbation, the Pearl River Delta, covering the cities of Hong Kong, Macau, Guangzhou, Foshan and Shenzhen, it already boasts physical, economic and financial links to the engine room of the mainland economy,” Gulliver said.
HSBC plans to expand retail banking and digital banking in Guangdong to capture the opportunities opened up by the growing wealth in the area.
Financial Secretary John Tsang Chun-wah said at the same forum that he believes financial technology, yuan internationalisation and capital market fundraising would provide the way ahead for Hong Kong as an international financial centre.
While the credit rating agencies have pointed out the city’s proximity to mainland China would add to the risks for the city in the event of China’s slowdown, Tsang said Hong Kong would continue to benefit from China’s economic growth.
“Following a double-digit economic growth for 30 years, the 6.5-7 per cent growth this year is still better than that of many developed countries,” Tsang said.
The high liquidity of Hong Kong’s financial markets allows companies to conduct their initial public offering (IPO) here as well as mergers and acquisitions. Hong Kong remained the No 1 IPO market worldwide last year and the first quarter of this year.
Tsang said the way forwarded for Hong Kong is to develop fintech, or technology used in the financial sector.
In his Budget speech, Tsang unveiled plans to encourage start-ups and research and development.
“We need to make sure Hong Kong has a role to play in the digital age,” he said, adding that
Hong Kong may join the Beijing-led Asian Infrastructure Investment Bank (AIIB) later this year and play a role in “One Belt One Road” fundraising activities.
Mark Tucker, chief executive and president of AIA Group, the largest insurer in the city and the third largest in Asia, said Hong Kong would continue to be an ideal place for international insurance companies to expand their business.
“Hong Kong has a large pool of yuan, which allows insurance companies to launch RMB insurance policies and other products,” Tucker said, adding that insurance companies need to invest in diverse products for their premiums and Hong Kong provides these investment opportunities.