Advertisement
Hong Kong offers Chinese brokerages a prime chance to expand their global business
- Chinese brokerages have become key players in Hong Kong’s financial industry with their familiarity with China’s market and mainland connections
- It is time for them to step out of their comfort zones and embrace the cross-border financing wave if they want to be globally competitive
Reading Time:3 minutes
Why you can trust SCMP
Once overshadowed by foreign investment banks, Chinese brokerages now see a golden opportunity to grow their overseas business by using Hong Kong as a launch pad.
Advertisement
Foreign investment banks and Hong Kong brokerages, which mainly served local clients, controlled the capital market in the city before 1997. The Asian financial crisis saw the fall of Peregrine, a big local brokerage, and European and American investment banks led by JPMorgan and Merrill Lynch took the chance to occupy the Hong Kong market and dominate it for the next decade.
A glimmer of light appeared for Chinese brokerages in Hong Kong after 2007. European and American investment banks withdrew staff members and funds from Hong Kong because of the global financial crisis, leaving room for Chinese securities firms to expand their footprint.
Relying on their familiarity with China’s capital market and connections with mainland companies, they quickly became key players in the city’s financial industry. The changing status of Chinese securities firms, whose business in Hong Kong has expanded significantly since they began operating in the city in 1993, reflects the transformation of China’s capital market from restricted one-way opening to more systemic reform.
In the decade up to 2017, Beijing gradually tested the waters of further opening up the cross-border investment channels between mainland China and Hong Kong. Its actions have included the launch of Stock Connect and Bond Connect, which allows overseas investors to trade bonds in the mainland market.
According to statistics from Dealogic, the amount of funds raised in 2017 from initial public offerings (IPO) sponsored by Chinese securities firms in Hong Kong reached nearly HK$54 billion (US$7 billion), accounting for 42.1 per cent of the total.
Advertisement
Advertisement