Hong Kong’s stock market has room to grow as city marks 30 years of H-share listings

China’s fast growth provides Hong Kong’s stock market with room for development, Financial Secretary Paul Chan says
More than 1,400 Chinese companies have raised US$1.05 trillion in Hong Kong in the last 30 years

HKEX

Enoch Yiu

Published: 9:30pm, 22 Aug 2023

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Hong Kong’s stock market has plenty of room to grow as the market capitalisation is a fraction of China’s gross domestic product (GDP), according to Financial Secretary Paul Chan Mo-po.

“At present, the Hong Kong stock market’s total market capitalisation represents only 27 per cent of China’s GDP,” Chan said at a ceremony organised by bourse operator Hong Kong Exchanges and Clearing (HKEX) on Tuesday to mark 30 years of listing of H shares.

Even after including the market capitalisation of Shanghai and Shenzhen stock exchanges, the three markets represent only 96 per cent of the country’s GDP, he added, noting that the New York Stock Exchange and Nasdaq have a combined market capitalisation amounting to 170 per cent of the US GDP.

“As our country is still growing at a fast speed, we can expect our stock markets to continue to have huge room for development,” Chan said as he urged HKEX to do more to attract international listings from Southeast Asia and the Middle East.

Financial Secretary Paul Chan speaks at a ceremony to celebrate the 30th anniversary of H-share listings at the HKEX Connect Hall on Tuesday. Photo: Yik Yeung-man

Hundreds of brokers, representatives of listed companies, investment bankers, accountants and lawyers gathered on Tuesday in Connect Hall, the former trading venue of the Hong Kong stock exchange until trading went digital in 2017.

“Thirty years ago, Tsingtao Brewery used beer instead of champagne at its listing ceremony as the first H shares to list in Hong Kong,” said HKEX chairwoman Laura Cha Shih May-lung. “At that time, we never imagined the H shares reform would come such a long way as we see today.”

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Cha, Chan, HKEX CEO Nicolas Aguzin, former HKEX chairman Charles Lee Yeh-kwong and others who helped with the H shares reform struck a ceremonial gong to mark the milestone.

On July 15, 1993, Tsingtao Brewery handed out glass mugs filled with its namesake beer for guests to celebrate its HK$889 million (US$114 million) initial public offering (IPO), kicking off the listing of H shares in the city.

Since then more than 1,400 Chinese companies have raised HK$8.3 trillion in Hong Kong, accounting for about two-thirds of the total. They represent 80 per cent of market capitalisation and turnover today, according to stock exchange data.

The SCMP business cover on July 16, 1993, features the Tsingtao listing story. Photo: SCMP

If all the dividends paid by Tsingtao since 1993 were reinvested in the stock, the total return would be 42 times, according to Bloomberg’s analytics. Put another way: HK$5,600 invested in 1993 for one lot of 2,000 of the company’s shares would be worth HK$117,440 today.

Aguzin said the first H-share reform “kick-started Hong Kong’s journey to becoming a leading international financial centre”.

Looking ahead, he said the bourse operator will continue to carry out various reforms to support China’s technology development.

“At HKEX, we expect China’s capital markets to continue to evolve rapidly, potentially tripling in price over the next decade,” Aguzin said. “We call this the big bang of finance, and it will reshape global markets for decades to come.”

HKEX chairman Laura Cha speaks at a ceremony to celebrate the 30th anniversary of H-share listings at the HKEX Connect Hall on Tuesday. Photo: Yik Yeung-man

Aguzin said the exchange will continue to create platforms and products to support China’s ambitions to cut down carbon emissions by building up green financing.

In addition, the exchange will continue to reach out to international firms to list here. Aguzin has overseen the opening of HKEX offices in New York and London, and has led roadshows to the Middle East and Southeast Asia this year.

“Hong Kong has a key role to play in supporting growth in Asia, the flourishing of innovation and new technology and the global sustainability agenda,” Aguzin said. “As a bigger proportion of the global economic activity moves to Asia, Hong Kong will have a key role to play.”