【Financial Center】Edmond Leung: Hong Kong Should Not Only Be a "Conduit" but Also an "International Financial Platform" – Suggests Three Aspects to Focus On

Hong Kong-listed company chamber chairman Chen Jiaqiang stated personally that with the deepening of the country’s financial reforms, Hong Kong’s functions can be further expanded. It should not only serve as a “channel” but also become a “platform.” Currently, more and more Chinese companies are listed on Hong Kong stocks, leading Hong Kong toward an “internationalized Chinese market.” He suggested starting from three aspects to make it easier for mainland capital to invest in international assets and encourage international companies to list in Hong Kong, making Hong Kong a truly influential “international financial platform” with pricing power.

The China-Hong Kong market has become an important alternative to investing in U.S. tech stocks

He pointed out that a large number of Chinese tech stocks listed in Hong Kong provide global investors with an additional option. “In the past, if you wanted to invest in tech stocks, you basically went to Nasdaq,” but now you can allocate Chinese tech stocks to diversify risk and share the dividends of China’s tech development. He believes that Hong Kong and China markets have become an important alternative to investing in U.S. tech stocks, which also proves Hong Kong’s pricing capability.

However, the market currently lacks international companies. He admitted that attracting international companies to list in Hong Kong “sounds easy but is difficult to do.” The biggest challenge is liquidity. If an international company lists in Hong Kong without sufficient funds, trading volume will be low, and stock prices may fluctuate easily, which is unfavorable for companies and investors.

He pointed out that although the Connect mechanism allows foreign companies listed in Hong Kong to be included in the Hang Seng Composite Index and be bought and sold by Northbound funds, the problem is that inclusion in the index takes time and involves uncertainty, which is hard for international companies preparing to list to accept.

Suggest increasing the flexibility of the Connect mechanism, such as setting up a green channel

Therefore, he suggested increasing the flexibility of the mechanism, for example, creating a green channel specifically for some strategically significant international companies, allowing them to access mainland funds immediately upon listing. Additionally, to make it easier for international companies to be included in the Connect, whether through main or secondary listings, emphasizing that not all companies qualify, but only those with representativeness and the ability to enhance Hong Kong’s international image.

Chen explained that allowing mainland investors to invest in international companies can enhance Hong Kong’s voice in international asset pricing. When mainland funds participate in the pricing of international companies, they are no longer passive price takers but active price setters.

Allow MPF to invest more in Hong Kong local ETFs

He also suggested that the current MPF (Mandatory Provident Fund), which exceeds HKD 16 trillion in size, should be allowed to invest more in Hong Kong local ETFs, providing more options for workers, improving ETF market liquidity, and expanding the institutional participants in Hong Kong, making the market more stable.

He added that once the Hong Kong ETF market has sufficient depth and breadth, it will have the confidence to push for further opening of the Connect mechanism. He also proposed further expanding the ETF Connect, including all ETFs composed of international stocks.

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