Stockbrokers and funds flock to set up shop in Hong Kong, fuelling boom in financial services
A record number of stockbroking firms, fund managers, private equity investors and other financial firms registered in Hong Kong last year, underscoring the boom in the city’s biggest economic contributor as a pipeline of companies are poised to launch their blockbuster initial public offerings.
Financial firms licensed by the Securities and Futures Commission (SFC) rose 3.5 per cent to 2,702 at the end of March, compared with the same time last year, according to data by the watchdog agency. Licensed stockbrokers increased 10 per cent to 563, still some ways from the 1980s record of 900, but a substantial growth from 400 several years ago. One in 10 of the city’s stockbroking firms are owned by mainland Chinese, surpassing the US as the biggest non-Hong Kong owner of broking licenses, the data showed.
The growth is particular good news for an economy where financial service contributes to the second-biggest portion of output, and employs the second-biggest part of the city’s workforce.
“The active stock market has attracted many mainland firms to enter the Hong Kong stock market, where they hire a lot of people,” said the Hong Kong Securities Association’s chairman Gary Cheung. “This has boosted the brokerage and securities industry as a whole.”
Brokers have been drawn to Asia’s third-largest financial market by the HK$130.3 billion (US$16.6 billion) of shares that changed hands everyday on average in the first five months of this year, a 73 per cent increase from the same period last year.
Stockbrokers became more profitable, with their combined profit jumping by two-thirds to HK$23.54 billion in 2017, as the number of equity-trading clients increased 7 per cent to 1.66 million during the year.
That has helped the SFC’s finances, which collects fees from every transaction in the market. The watchdog reported a fiscal surplus of HK$242.86 million for the year ended March, turning around from an operational deficit of HK$355.64 in the previous fiscal year.
That raised the SFC’s accumulated surpluses to HK$7.16 billion, putting it in a better financial position to afford buying its own property, instead of having to fork out more than a quarter of HK$1 billion every year to rent the most expensive address in the world’s priciest office market.
"As markets become increasingly complex and interconnected, it is crucial that we press ahead with initiatives to advance Hong Kong’s position as an international financial centre whilst ensuring investor protection,” the SFC’s chairman Carlson Tong Ka-shing said in February, while tabling a plan to buy its own premises.
The SFC also stepped up on its enforcements and supervision, taking disciplinary action against 31 licensed corporations and individuals, imposing HK$483 million in fines during the year, the watchdog said.
"We are moving forward with our front-loaded regulatory approach to tackle market misconduct and other irregularities with earlier and more targeted intervention,” said the SFC’s chief executive Ashley Alder. “This allows us to get ahead of threats to market integrity, safety and quality, whilst also focusing our enforcement efforts on areas posing the greatest risks to investors and our markets.”
“Although the stock market is volatile in the first half of this year, the securities industry remain solid as there are opportunities arising from China’s Greater Bay Area development. The outlook of the Hong Kong securities industry remain positive in the years ahead,” Cheung said.