Establishing a stock market in Macau easier said than done

Falling revenues from gaming and tourism amid slowing growth on the mainland have prompted the Macau government to propose a stock market to diversify its economy and lessen dependence on gambling. It envisages a Nasdaq-like market trading in offshore yuan that allows fundraising by technology companies from the Greater Bay Area economic and innovation hub, incorporating Macau, Hong Kong, Guangzhou and eight other cities in Guangdong.

The plan has the support of Guangdong, which is seeking to tap more capital for the hi-tech sector, and at Beijing’s request Macau has commissioned a feasibility study. He Xiaojun, director of the province’s financial supervision and administration bureau, says he hopes the central government will give its blessing to the plan by mid-December, the 20th anniversary of Macau’s return to Chinese rule.

Hong Kong can hold its own against new exchange on Macau’s block

That said, Macau’s small size and small financial industry look like major stumbling blocks, compounded by the presence just next door of the Hong Kong stock exchange. A stock market depends on financial liquidity and, on that count, Hong Kong’s pool of capital is an ocean compared with Macau’s pond. For access to it, eight Macau-domiciled companies, including six casino operators, are listed on the Hong Kong exchange. That is not to mention Macau’s lack of a supporting services industry in law, accounting and finance.

If Beijing were to give the go ahead, the new stock market would be the fourth in China, which is big enough to support that many, but would overlap with the Nasdaq-style ChiNext and the SME board of the Shenzhen Stock Exchange. Nonetheless, the Macau government is to be commended for thinking outside the box about the territory’s need to diversify its gambling-dependent economy and broaden its financial infrastructure. In that respect, a role as the GBA’s tourism and leisure centre offers more immediate prospects of economic growth, with casino operators having taken the lead by helping introduce more family-oriented entertainment along with art festivals and business conventions. It is too early to tell whether Macau will also find a niche in regional capital raising. But if it does it could also find a role in China’s efforts to deepen ties with other Portuguese-speaking countries, such as Brazil.