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Key projects will boost securities business: CE

By duan ting in Hong Kong | HK Edition | Updated: 2017-06-16 08:04
Key projects will boost securities business: CE

Hong Kong’s well-entrenched status as one of the region’s premier financial hubs is poised to benefit immensely from a slew of national economic strategies, including securities trading links that will propel outbound and inbound financial activities on the Chinese mainland and create vast opportunities for the SAR’s business and trading community. [Billy H.C. Kwok / Bloomberg]

HK to benefit from opening-up of world's second largest economy

Hong Kong's financial industry, including the securities trade, has flourished under a slew of benefits brought about by "One Country, Two Systems", as well as the Chinese mainland's breakneck pace of economic development, in the past two decades, said Chief Executive Leung Chun-ying.

In a speech marking the 10th anniversary of the Chinese Securities Association of Hong Kong (HKCSA), he noted that the SAR's financial services sector accounted for only 16 percent of the city's gross domestic product five years ago, but this has now risen to 18 percent. And, the growth potential is huge, aided by the policies of the Financial Services Development Council which the government created in 2013 to further boost the industry's development.

Leung believes that the country's two key projects - the Belt and Road Initiative and the Guangdong-Hong Kong-Macao Greater Bay Area plan - will bring long lasting opportunities to Hong Kong, recalling that, since the handover, the mainland's rapid growth has injected great momentum into Hong Kong's economic progress.

He said with the expected huge infrastructure projects coming up in the countries and regions involved in the Belt and Road Initiative, the demand for funds and capital formation will generate numerous financial activities, including securitization of assets and debts, which will offer big opportunities to Hong Kong's securities business.

The SAR government is also actively promoting innovative financial industries, such as granting tax benefits to qualified aircraft leasing and management service providers to attract them to Hong Kong, and setting up the Hong Kong Maritime and Port Board to develop value-added services like maritime finance, he said.

Financial heavyweights also expressed confidence in the Belt and Road Initiative, the Guangdong-Hong Kong-Macao Greater Bay Area and the upcoming bond connect between Hong Kong and the mainland, saying they'll be new drivers for the local economy.

"The Belt and Road Initiative could be a guide to the expansion of Chinese mainland brokerages firms," said HKCSA Chairman Tan Yueheng, who's also chief executive officer of BOCOM International Holdings Co Ltd. He explained that the Belt and Road countries and regions could be the first destinations for mainland securities houses going out.

Currently, the HKCSA has 109 institutional members, including banks and securities firms, according to Tan. He said Hong Kong will be like Shanghai and Shenzhen, where mainland brokerages will set up offices step by step, thus raising the association's membership.

Tan said the Greater Bay Area plan presents another vast opportunity for Hong Kong in addition to the country's 13th Five-Year Plan (2016-20) and the Belt and Road Initiative.

He said the cities in the Greater Bay Area are the core places with great economic growth as they make up about 5 percent of the country's population and contribute approximately 13 percent to the total GDP. It could even become a new driver for the world economy, and Hong Kong could see its superiority in finance, trade and services given full play.

Tse Yung-hoi, chairman of BOCI-Prudential Asset Management Ltd and HKCSA honorary president, said Hong Kong could play a crucial role as an international fundraising platform in terms of refinancing, mergers and acquisitions, cashing in on the city's professional talents like lawyers and consultants who could ensure the viability and safety of the entire industry's chain investment in relation to the Belt and Road Initiative.

Industry experts believe the bond connect, due to be launched in phases this year, will facilitate the integration and improvement of the bond markets of Hong Kong and the mainland, as well as the renminbi's internationalization.

The People's Bank of China and the Hong Kong Monetary Authority - the SAR's de facto central bank - gave the nod to the bond link in mid-May, starting with northbound trading, and experts believe it will be extended if things proceed smoothly.

Tse said starting with northbound trading may be due to the fact the mainland is the world's third-largest market for bonds with a market size of $8.5 trillion and multiple products, adding that up to 90 percent of the market involves interbank bonds, while the rest are exchange-traded bonds.

He said the bond connect marks the third of three steps in the opening-up of the mainland's bond market. The first step allows overseas investors direct access to its capital market through the Qualified Foreign Institutional Investor (QFII) program, which was introduced in 2002, followed by the opening up of the interbank bonds market in 2005, allowing access to foreign investors even without the QFII.

Yim Fung, chairman and chief executive officer of Guotai Junan International Holdings Ltd, said the bond connect will facilitate internationalization of the renminbi and improve Hong Kong's role as a global financial centre as its bond market is still relatively smaller compared with other mature financial centers.

He said the link will benefit mainland brokerages as trading is their main business, while Hong Kong's market is dominated by stocks and its bond business is still developing.

So far, Hong Kong's benchmark Hang Seng Index has rallied more than 40 percent, or 8,000 points, from last year's low of 18,000 points in February to nearly 26,000 points in June this year, outperforming major indexes across the globe.

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