Editorial | HKEX roars back on silver anniversary to remember with pride
Those who wrote off the Hong Kong stock market have been left to eat their own words as it left rival indexes trailing and regained its global IPO crown
Who would have thought 2025 would be such an auspicious year for Hong Kong Exchanges and Clearing (HKEX) to celebrate its silver jubilee. The city has been tangled up in the worsening trade and tech war between China and the United States. Until last year, many if not most international fund managers had written off Chinese equities as “uninvestible”, as the Hang Seng Index almost fell to its lowest since Covid-19 struck.
But, as if out of the blue, Asia’s third-largest stock market roared back, having vastly outperformed the S&P 500 so far this year. And, as a nice anniversary present, it has recovered its global initial public offering (IPO) crown. Operator HKEX will be celebrating 25 years as a listed company next month, even though it can trace its roots to 1891.
In the past two decades, the size and services of HKEX have grown leaps and bounds. Its market cap has jumped to over HK$500 billion from HK$8.6 billion. To integrate cross-border financial markets, diversify options for investors and promote yuan internationalisation, the Stock Connect was introduced in 2014, followed by the Bond Connect in 2017. The most recent, Swap Connect, was launched in 2023 to enable outside investors to trade and clear onshore renminbi interest rate swaps through the so-called northbound channel.
Today, HKEX is one of the world’s most globally competitive exchanges, thanks to a series of regulatory reforms. These include allowing secondary listings, share classes with different voting rights, and IPOs for qualified pre-profit firms, especially those in hi-tech fields that have shown innovation. At the same time, investor rights and protection have been strengthened. All these moves paved the way for the city’s return to IPO glory and the top of the global rankings. It was the world’s largest IPO market in seven years between 2009 and 2019.
The Hang Seng Index has surged 60 per cent off its January 2024 lows. More importantly, what was thought to be bad for the city’s trade-dependent economy turned out to be a net positive for its financial markets. US President Donald Trump’s misdirected trade war and a generally hostile US investment environment for Chinese companies mean the city is now the premier safe harbour for those companies seeking to raise capital. Trump’s erratic policies have started a “sell America” trend among investors, while Chinese assets have regained their appeal.
To begin the next HKEX chapter, it has big plans for more cross-border listings, fixed income and derivative products. Our city could gain such advantages because of its internationally recognised legal and financial expertise and infrastructure. And the exchange is a key institution that has kept Hong Kong in good stead as a global financial centre and key conduit to the mainland.