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By Christina Bao, Head of Global Issuer Services at HKEX

Over the past 20 years Hong Kong’s capital markets have grown in spectacular fashion. Looking forward, HKEX, at the heart of those markets, continues to look for new and exciting sources of growth. We are welcoming companies to our markets from new jurisdictions, supporting fast-evolving sectors and designing strategies that deepen our relationship with companies and investors around the world.

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Hong Kong’s capital markets have enjoyed stellar growth and expansion over the past 20 years, driven in large part by the role we have played in Mainland China’s ongoing economic liberalisation. Now, Hong Kong Exchanges and Clearing Limited (HKEX) is looking to leverage its unique strengths by exploring new frontiers, innovations and socio-economic shifts that will help drive our continued growth.

The jewel in HKEX’s crown is its equity listings market. And, in the last twenty years, HKEX has welcomed companies with share offerings raising HK$3.9 trillion, finishing the last decade as the world’s largest primary public equity fundraising venue by proceeds[i]. Hong Kong’s Initial Public Offering (IPO) franchise is central to its position as the premier Asian capital market.  And we continue to seek innovative ways to further solidify our unique position at the heart of that market, expanding our services and platforms to better serve and connect regional and global investors and companies.

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We are mindful that this expansion must be client-centric and demand-driven, evolving with the business community around us. An example of this is the Biotech Chapter that HKEX introduced two years ago, which has helped foster a new but rapidly growing biotech ecosystem in Hong Kong. And we know that there are other emerging industries and growing businesses in dynamic, developing countries that can directly benefit from our services and platforms.

 

Focused on Growth Frontiers

HKEX has attracted many Mainland Chinese companies to list in Hong Kong in the past two decades, largely due to the rapid growth of the Chinese economy, coupled with increasing demand from global investors for exposure to the region’s growth.  The ongoing economic changes gradually taking shape in China are today enabling new technologies and enhanced R&D capabilities to blossom on the Mainland and HKEX is well positioned to support these new corporate stars of the future, supporting them in their growth ambitions by proving access to international capital, through our markets. 

We are also working to develop IPO pipelines in rapidly emerging markets that will bring interesting and diverse growth stories to Hong Kong’s markets. Some of these new jurisdictions have the economics and demographics that will create fertile ground for the next unicorns. Places such as India, Indonesia and Vietnam are hotbeds of innovation and new businesses – all of which will require capital; and their domestic markets may not have the capacity to meet immediate needs. With a large population of young consumers who will gain spending power in the next decade, companies in these jurisdictions will need reliable access to capital to better serve this rising demand. And this is where Hong Kong and HKEX come in.

Expanding our footprint in these countries will not be straight forward, as they differ in language, culture and regulatory regimes. However, with our deep and liquid global markets, our strong connection to China, our international mind set and our well-known ability to adapt, we see HKEX playing a notable role in helping fuel the growth of Asia’s best and brightest businesses in the years to come.

 

Building Ecosystems

HKEX is also looking to new and evolving sectors for growth, much as it has done with the biotech industry. The global pandemic in the first half of 2020 has accelerated the interest in the life sciences industry, and we believe the attention and investment in biotech and healthcare will continue. HKEX is focused on building an ecosystem for the long-term development of such sectors, encompassing issuers, investors, professional services providers, and robust market infrastructure.

 

Hong Kong capital markets have historical strengths in real estate, finance, technology and consumer products and services, and we are well-positioned to work with companies in these sectors from new jurisdictions. Fintech is a particularly exciting arena for example, and with its applications for mobile services, can also reduce inequality and better serve the new generation. Online services from shopping, payment to O2O (online to offline), B2B solutions, and education show great promise. These businesses need a capital market that can appreciate their business models, and provide them with financing solutions. The lack of legacy systems or the absence of trusted and deep capital markets in many developing countries, provide significant opportunities for HKEX to support the growth of businesses through the region.

 

Clients First

Supporting growth across the corporate lifecycle is critical to economic sustainability.  From private company to pre-listing enterprise, from celebrating an IPO to maturity as a listed corporation, HKEX looks to partner with organisations through the journey.

We are continuously thinking of new ways to offer the products and services that we are well-positioned to provide. This requires us to think beyond the IPO, and to consider the listing as one chapter in the long and fruitful relationship between HKEX and company.

We typically begin to directly interact with potential listing companies about two years before they go public, although this can be much longer. Companies have many options available to them to help fund their ambitions, and in order for HKEX to remain attractive and competitive we must seek innovative ways to support pre-IPO companies, extolling the benefits of public company life.

HKEX already leads the world in IPOs, but we know that there are still ways to improve the Hong Kong listing experience, such as the recent improvements we made to the settlement process, which will increase efficiency.

We also want to improve how we support and keep in touch with our HKEX family once they have listed. We know that we can add value in various ways, such as supporting their dialogue with their own investors, through strong IR, providing training on governance and ESG standards, and supporting the streamlining of processes around financing activities.

All of these interactions start with understanding our clients’ evolving needs and designing our solutions by leveraging technology and our skills and expertise. Our focus is and always will be, on making the whole ecosystem work better, on making our markets ever more attractive, and supporting the prosperity of all those involved.

 

Our Continued Evolution 

This year HKEX is celebrating the 20th anniversary of its own IPO. We have evolved from a relatively small Hong Kong-focused market with local participants to become a globally recognised market that plays a pivotal role connecting China and the rest of the world. We are more relevant than we have ever been and we are relied upon by international and regional investors and companies alike. We are the global markets leader in the Asian time zone.

HKEX is expanding its footprint, diversifying and building the global attractiveness of its markets. We want to lead by example. We are doing this with an open mind, listening and collaborating to ensure that we deliver what the market needs.


 

[i]    Dealogic and HKEX data.

Credit: This article first appeared in Ming Pao on 16 June,2020