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Pooling wealth in Hong Kong is an ideal choice

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Pooling wealth in Hong Kong is an ideal choice

September 12
00:45 2023

Heightened geopolitical tensions and sluggish economic recovery weaken investors’ confidence towards wealth management. The insolvency of Silicon Valley Bank, the 16th largest bank in the United States, rang global investors’ alarm bells. To ride out the storm, investors quest for reliable and transparent centres that can withstand the risks. Among the cities, the three traditional international financial centres are always on investors’ minds. With the global economic gravity shifting from the West to the East, the Asia economy will continue to grow at a faster pace and its share in the world economy rise further in the future. If investors are fond of Asia capital markets, Hong Kong is, in any event, an ideal choice.

Similar to New York and London, Hong Kong’s financial markets operate under transparent regulations that are in line with international standards. In the latest Global Financial Centres Index report, Hong Kong ranks third after the aforementioned cities and its specialisation is one of the most highly valued benefits. The report applauds Hong Kong’s depth of development in various areas such as investment management, banking, insurance, professional services and government regulation, demonstrating Hong Kong’s capability to complement the strengths of New York and London. Despite criticisms about the enactment of national security law, the city’s competitive elements remain intact, including the sound legal system, simple and low tax system, free flow of capital, rich talent pools, breadth and depth of financial products, and so on. In a volatile economic environment, these strengths should be highly recognised.

More importantly, Hong Kong thrives on close financial integration with Mainland China, which is a unique advantage that Tokyo and Singapore do not have. According to the figures provided by the banking sector, Chinese enterprises account for 76% of the market capitalisation of the Hong Kong stock market and 87% of its turnover. Capitalisation aside, the city enjoys unparalleled access channels for cross-border portfolio investment flows to and from Mainland China, such as Stock Connect, Bond Connect and the Mutual Recognition of Funds arrangement. These channels enable overseas investors to access the Mainland capital markets through connections established between the Mainland and Hong Kong markets. This is one of the important, if not the topmost reasons, why Hong Kong’s foreign exchange market, with an average daily volume of US$782.9 billion, is significantly ahead of other financial centres in Asia like Singapore.

The Hong Kong economy faces macro-financial challenges amid rising interest rates, ongoing stress in Mainland China, and the economic downturn. Investors should, nevertheless, be more long-sighted. At any time, the indexes, transaction volumes, and figures can be occasionally tempered. History repeats itself: when a country encounters a series of accidental events, there may be short-term economic fluctuations. Yet, the long-term development hinges on the economic fundamentals. In terms of production, China’s manufacturing industry ranks first in the world with a complete range of industries, a relatively complete industrial chain, an efficient division of labour system, flexibility and resilience to global economic fluctuations and uncertain hiccups. As long as China’s economy grows steadily, Hong Kong’s financial markets are likely to prosper. Pooling wealth to Hong Kong’s markets at this moment is perhaps a good juncture.  

However turbulent the capital markets may be, Hong Kong will continue fortifying its status as an international financial centre in Asia. Its strenuous efforts in stabilising the financial market are well acclaimed by the international community. To illustrate, the International Monetary Fund (IMF) recently published a Mission Concluding Statement, assuring that Hong Kong’s financial system remains resilient and the IMF has confidence in Hong Kong’s ability to withstand the challenging global macro-financial environment. With the super-connector’s role, the city’s transparency, openness and vibrancy will continue to attract the world’s top-notch talents from the financial and other fields to embrace the boundless opportunities offered.

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