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Opening up New Markets with Reforms and Innovation

As we enter the fourth quarter of 2024, the overall market atmosphere has significantly improved, with the Hang Seng Index rising to a two-and-a-half-year high, accumulating a gain of over 5,600 points in the past 15 trading days, representing an increase of 33%. The average daily turnover since September and till last Friday was about HK$192 billion, doubling that in August. The market capitalisation of Hong Kong Stock Exchange also rose to HK$39.4 trillion. Investment products with a higher share of Hong Kong stocks also performed well. For example, according to a report by a research institution, the outstanding performance of Hong Kong stocks in September led to an overall return of over 7% for MPF investments in the third quarter, making it the best-performing quarter in nearly two years.

Multiple factors are contributing to the market's ongoing improvement. Among them, the strong economic support measures recently announced by the Mainland authorities are playing a crucial role. At the same time, the market believes that the United States has commenced its interest rate cut cycle, leading to an increased risk appetite among investors. For many fund portfolios, buying demand had been triggered based on position indicators. Coupled with the very attractive valuations in both the Hong Kong and Mainland markets, investors have become cautiously optimistic about outlook of the market.

Last week, I attended the 35th Anniversary Cocktail Reception of the Securities and Futures Commission (SFC). In my speech, I expressed three points of expectation for the SFC: to carry out its dual mandate well as both a regulator and an enabler of market development; embrace technological changes; and promote cross-boundary regulatory co-operation.

The market rebound and investors' cautious optimism about future market performance are expected to drive more companies, including innovative and technology enterprises, to accelerate their listing processes in Hong Kong. At the same time, this will encourage more businesses to establish a presence in the city. This trend also reflects that the Hong Kong SAR Government's efforts in enhancing market competitiveness are beginning to bear fruit.

For example, a tech company followed up by the Office for Attracting Strategic Enterprises (OASES) has recently leased 8,000 square feet of Grade A office space as its international business headquarters. It has set up its corporate treasury centre and research and development (R&D) centre in Hong Kong with a view to better expanding its business in the ASEAN region. As more companies set their foothold in the city, this will help boost demand for office space and other professional support services.

In November, OASES will announce a new batch of strategic enterprises, including more than ten companies, with over half of them coming from the artificial intelligence and big data analytics sector. These companies come from the Mainland, the United States, Europe, and more, and some are market leaders in their respective fields.

Recently, a tech company followed up by OASES set up its international business headquarters in Hong Kong. It has also set up its global treasury centre and R&D centre in the city.

A vibrant capital market helps facilitate the efficient allocation of funds, and channel capital towards supporting innovations in technology, industries and business models. This would not only inject new impetus to the economy and allow investors to achieve better returns, but also enable the community to better share the benefits of economic development.

For this reason, continuous reform and innovation of market regimes are crucial.

Over the past few years, Hong Kong's listing regime has undergone continuous innovative reforms. In 2018, we allowed pre-profit and pre-revenue biotech companies, as well as new economy companies with weighted voting rights structures, to list in Hong Kong. To date, more than 330 new economy companies have listed on our stock exchange. Although they represent only about 13% of the total number of listed companies, their combined market capitalisation exceeds HK$9.6 trillion, accounting for over 26% of the total market capitalisation of Hong Kong stocks. Moreover, they contribute to nearly 23% of the daily turnover in Hong Kong's stock market, taking it to new heights. Last year, we further introduced Chapter 18C to support innovative companies engaged in specialist technologies to raise funds. These reforms have not only enhanced the attractiveness and vitality of Hong Kong's stock market but also made Hong Kong the preferred listing destination for many innovative tech companies.

The listing of more innovative and high-quality companies in Hong Kong will enhance the diversity of Hong Kong-listed companies and attract more long-term investors who focus on new growth drivers in the economy. A thriving capital market will, in turn, attract more high-quality companies, thus creating a virtuous cycle.

At the end of this month, I will lead a delegation comprising representatives from the financial and innovation and technology (I&T) sectors to the Middle East to promote the latest developments of Hong Kong as an international financial, trade and I&T centre. We will showcase Hong Kong's unique strengths and functions under the "one country, two systems" arrangement, as well as the new opportunities arising from the Guangdong-Hong Kong-Macao Greater Bay Area and the Belt and Road Initiative. Deepening multi-level exchanges and co-operation between Hong Kong and the Gulf Arab States will bring more win-win business opportunities for investors and companies in both regions. This will further reinforce Hong Kong's role and the contributions we can make as a "super connector" and "super value-adder".

October 6, 2024