Recently, we invited Eric Li from Phillip Securities to provide the Selfwealth community a run-down on the ins and outs of the HKEX, as well as the key trends and outlook for the Hong Kong stock market.

You can watch the full webinar above, but you can also brush up on 10 key learnings below.

Please note, the below points have been lightly edited for clarity.

1. HKEX is more than just a regional stock market

Hong Kong Exchanges and Clearing (HKEX) is a major exchange group and operates a range of equity, commodity, fixed income and currency markets. The HKEX is a leading IPO market and is Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, offering regional and international investors access to Asia’s markets.

Furthermore, HKEX is also a leader in metals trading through its wholly owned subsidiaries, the London Metal Exchange (LME), LME Clear, and Qianhai Mercantile Exchange (QME) in China.

2. The HKEX has a distinct strategic position in global markets

As a destination market, and China gateway, uniquely positioned at the intersection of Chinese and international capital flows, Hong Kong has long been connecting China with the world and the world with China. And, with the accelerated opening-up of China’s capital markets, HKEX continues to be a pioneer at the forefront of this historic transition, shaping the global markets landscape.

A wide range of products are traded on HKEX markets, including equities, ETFs, REITs, bonds, structured equity products, equity index and single stock derivatives, currency futures and commodity derivatives. 

3. Trading across Hong Kong is in the midst of a significant boom

There is currently strong growth in the Hong Kong market, with average daily turnover (ADT) growth driven by New Chapter companies and HKEX Connect programmes.

4. Megatrends are at the centre of HKEX’s vision for the future

HKEX’s vision is to build The Marketplace of the Future by facilitating two-way capital flows between East and West, by using its scale and reputation as a platform to support all stakeholders, by capturing the megatrend opportunities that are shaping markets and societies.

The key themes for future development of the HKEX include:

• Connecting international financial markets while preserving Mainland standards

• Accelerating RMB internationalisation

• Raising capital for New Economy and innovative companies

• New and emerging assets

5. China could represent a ‘once-in-a-generation’ opportunity

China is tipped to see a “Big Bang of Finance”, with the combined value of the China onshore bond and stock markets expected to grow from US$31 trillion in 2020 to US$100 trillion by 2030. 

The HKEX is pursuing a number of strategies to support China’s development:

• Expanding and enhancing “Connect” programmes

• Becoming China’s go-to offshore risk management centre

• Solidifying its role as China’s preferred offshore fund raising centre

• Growing the portfolio of China-related product offerings

  
  

6. Hong Kong is a leading destination for IPOs

HKEX is a world-leading capital raising venue for Hong Kong, Mainland Chinese and international issuers. HKEX also acts as the frontline regulator of companies listed in Hong Kong.

It has been a global leader in IPOs and IPO funds raised, ranking number one seven times since 2009.

The top factors driving Hong Kong listings are:

• HKEX is a truly international market

• Trusted regulatory framework

• Efficient and deep IPO funding platform

• Unique Stock Connect platform attracts liquidity 

7. The New Economy is already transforming the Hong Kong market

The new economy has become the fastest-growing sector in Hong Kong. Since 2018 Listing Reforms, IPOs of new economy companies accounted for 65% of total IPO fundraising.

New economy stocks and related structured products account for an increasing portion of average daily turnover (ADT).

Close to 20 US-listed issuers have sought their “home-coming” listing in Hong Kong, with an emerging trend favouring dual-primary listing over secondary listing.

8. HKEX has established itself as a tech-oriented market

In 2021, 17% of cash ADT and 20% of single stock option ADV were contributed by the top 10 IPOs since 2018, and most of them are tech companies.

With the help of continuous American Depository Receipts (ADR) conversions, and trading migration from secondary listings, HKEX has become an emerging tech investment hub.

9. HKEX product range and accessibility continues to improve

Strategic highlights for the HKEX in 2021 included:

• Introducing HK SPAC listing regime

• Enhanced and streamlined listing for overseas issuers

• Launching a suite of new futures and options products spanning commodities and indexes

• Confirmed FINI (Fast Interface for New Issuance) platform launch for Q4 2022; reducing the IPO settlement cycle from T+5 to T+2

10. There are both opportunities and challenges facing the HK stock market

The future outlook of the Hong Kong stock market can be summarised according to four key developments:

• Cash Market trading volumes are expected to return to more normalised levels

• IPO pipeline may remain strong, underpinned by demand from Chinese companies seeking homecoming listings, and the introduction of the new listing regime for SPACs and overseas issuers

• Persistent inflationary pressures, tightening of monetary policy, upcoming interest rate hikes could cause volatility

• Geopolitical tensions (i.e. Holding Foreign Companies Accountable Act, sanctions, entity list, investment restrictions), the ongoing pandemic and travel restrictions will be some of the challenges shaping the year ahead