Two decades on, Hong Kong’s stock market sees China everywhere

Twenty years ago, when Hong Kong waved farewell to Britain’s 156 years of colonial rule, the city’s stock market was still in a bubble fuelled by rising household wealth and inflows of hot money.

The Asian financial crisis of 1997 was just around the corner, but nobody could foresee the subsequent bursting of the dotcom bubble in 2000, the 2002 penny stock collapse, the 2003 SARS epidemic, the euphoric boom and bust of 2007, the 2008 global financial crisis, the 2011 European debt crisis, and China’s 2015 A-shares market crash.

Yet despite all these seismic financial events, Hong Kong’s stock market today is as strong as ever.

Total market value has ballooned more than eightfold to HK$27.9 trillion (US$3.58 trillion) as of the second week of May, from HK$3.2 trillion at the end of June 1997, advancing the city’s capitalisation to the world’s seventh-largest, from 10th place over two decades.

The Hang Seng Index, the key indicator of the city’s bourse, has risen more than 60 per cent to cross 25,000, from 15,196 over the same period.

“Over the past 20 years, the Hong Kong stock market has become increasingly reflective of the Chinese economy,” said Mervyn Chow, chief executive officer for China at Credit Suisse, who has been working in Hong Kong’s financial industry since 1995.