FSDC Industry Exchange Series - Boosting Market Liquidity and Diversity

As an international financial centre, Hong Kong is renowned for its significant fundraising capabilities. Its vibrant financial ecosystem and liquid securities market provide businesses with access to a vast capital pool. As of July 2023, there were over 2,600 listed companies on the Hong Kong Stock Exchange with a total market capitalisation of approximately HK$36 trillion.1
Nonetheless, to maintain its prominence in the dynamic global financial landscape, Hong Kong must adapt to financial innovations and shifting investor preferences. New financing options for small-sized/ mid-cap companies and the surge in popularity of alternative investment opportunities, such as SPACs, virtual assets, and private equity, pose novel risks and opportunities. As a leading financial centre, Hong Kong is strategically positioned to cultivate a resilient and inclusive financial ecosystem, encouraging the growth of non-traditional assets while catering to the diversified financing needs of a broad spectrum of enterprises. Key to this is ensuring market liquidity, diversity and an effective market structure to promote sustainable market development.
In this context, Hong Kong needs to regularly assess its listing and regulatory frameworks to ensure they remain responsive to the evolving needs of diverse investor groups. The report proposes the establishment of a professional investor-only market in Hong Kong as a primary objective. This would facilitate the trading of emerging investment products and alternative asset classes, alongside contemplating other enhancements for the public capital market in the short-to-medium term. Such a comprehensive strategy asserts Hong Kong's commitment to upholding its significant role in global finance.
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