What is this? It is that Hong Kong is home to the only market in the world offering connectivity to two massive, uncorrelated pools of capital.

A market where companies looking to fund their growth ambitions can access both the global investor pool in Hong Kong and the sizeable, largely untapped, fast-growing investor base in Mainland China. This adds a whole new dimension to Hong Kong as an IFC.

The liquidity opportunity generated from Mainland China alone is very significant. The Mainland has a vast retail investor population, estimated at 212 million – equivalent to the population of Brazil – with a massive collective buying power, which drives A-share turnover on the mainland exchanges of close to RMB 1 trillion per day.

We see considerable scope for that opportunity to grow.

For example, a huge proportion of household wealth – estimated at around USD 35 trillion in 2020, or more than 40% – remains allocated to real estate, according to the National Institution for Finance & Development (NIFD). This offers significant opportunity for diversification.

Further, the amount of household savings held in bank deposits is also significant. According to data from the People’s Bank of China, total household deposits reached RMB 151 trillion (USD 21 trillion) in 2022.  

As structural changes play out and access to, and appetite for, diversified investor portfolios increases, the investor landscape in China will continue to evolve.

Pension and asset management sector reforms and new Connect channels are linking domestic investors to international companies listed in Hong Kong;  and we expect much of the capital currently held in ‘banks and bricks’ to find its way into a broader range of assets and specifically capital markets - in turn expanding capital pools and creating new possibilities for Hong Kong. This is what we call the Big Bang of Finance.

Pricing Hong Kong-listed stocks in RMB is another important facilitator – and an integral step towards connecting with this capital shift. The HKD/RMB Dual Counter Model allows listed companies to have both HKD and RMB counters for the same stock – and for investors to trade in local currency or offshore RMB.

We are already working with our partners on the next steps, including allowing trading of the RMB Counter through Southbound Stock Connect.

When Southbound Stock Connect opens for RMB trading, mainland investors will be able to instantly buy stocks that have an RMB counter - and this will include eligible international companies.

We believe the opportunity for Mainland investors to participate in Stock Connect without FX slippage could substantially increase Southbound flows.

And this, in turn, will draw more international issuers interested in transacting with this new pool of capital to Hong Kong’s markets; it will support new infrastructure that will help offshore RMB liquidity to grow; and it will reinforce Hong Kong’s position as the premier offshore RMB centre and support the RMB internationalisation process.

No doubt, the opportunity for Hong Kong is immense. And the response we have seen to our Connect enhancements reflects this.

Take ETFs for example, since they were included in Stock Connect one year ago, average daily turnover of ETFs on the Northbound channel has grown from RMB 20 million in July 2022 to RMB 681 million in June 2023. On the Southbound channel, average daily turnover of ETFs has grown from HK$ 0.2 billion to HK$ 4.6 billion during the same period.

The Big Bang of Finance is happening.

The connectivity we are building is unrivalled – and that creates unlimited possibilities. So amongst the fragility, there are opportunities to be seized: it is time to connect China and the world and progress and promote our markets for the benefit of all.