World’s largest stock market – but is Hong Kong diminishing as a financial centre?

Maria Ignatova, Partner and Head of Hudson Sandler Asia, reflects on Hong Kong’s status as an world class financial centre

For many years some of my friends in Europe were confused whether I lived in Hong Kong or Singapore. These two Asian cities and former British colonies were pretty uneventful, even synonymous, to European eyes. However, 18 months ago, the situation changed. The pro-democracy protests in Hong Kong suddenly put its location firmly on the global map. They also triggered a deterioration in its regional status as a strong financial centre with many freedoms. This status was eroded further after China introduced the national security law.

Despite all this Hong Kong still holds a leading position in global financial markets. The flood of Chinese companies seeking initial public offerings in Hong Kong made its exchange the world’s largest bourse in terms of market capitalisation in June. Last week Jack Ma’s Ant Group received regulatory approval for listing in HK, paving the way for the world’s biggest IPO. With a raise of about $35 billion – surpassing Saudi Aramco’s $29 billion raise in 2019 – and a valuation of at least $280 billion, this Ant is a giant. Helped by Ant’s IPO, by the end of this year the Hong Kong exchange will confidently overtake its London and New York rivals in terms of IPOs. In fact, the rivalry is actually much closer to home. Ant’s IPO is going to be a dual listing in Hong Kong and Shanghai and over the past five years China has introduced many changes allowing foreign investors greater access to its markets.

The greater China influence in and over Hong Kong is emerging. Earlier this month Hong Kong’s leader Carrie Lam postponed her policy address and went to Shenzhen to celebrate its 40th anniversary as a special economic zone. It is impossible for Hong Kong officials to hold meetings with US diplomats without Beijing’s approval and most companies operating in Hong Kong and China dare not say a critical word about China.

Despite a very low daily rate of COVID cases in the city, many restrictions are still in place. Many residents see a political hand behind keeping those restrictions in order to prevent massive public gatherings. A combination of the protests and remote working following COVID have impacted the city in many ways including a 20% slump in real estate prices in what was the world’s most expensive city and private schools have become more accessible.

I still believe that Hong Kong is one of the safest places in the developed world to raise children. I still believe that it has many freedoms and generally respects its residents. But recent events have definitely curtailed some of those freedoms and its status as a world-class financial centre.