Regional diversification top of HK's focus

Hong Kong's bourse operator is eyeing enterprises in Southeast Asia and the Middle East to strengthen its listing business, and solidify trade and investment ties. Oswald Chan reports from Hong Kong.

Hong Kong Exchanges and Clearing, which runs the Stock Exchange of Hong Kong, recently celebrated the 30th anniversary of the listing of H-shares that cemented the special administrative region's position as an international financial center by developing connectivity between SAR and Chinese mainland capital markets through connect trading programs in the equity, bond, exchange-traded fund and derivatives segments.

With three decades of market connectivity, Hong Kong's equity market is one of Asia's most international, diverse and liquid capital markets, having ranked as the fourth-largest in Asia and the seventh-largest in the world as of March. There were 2,606 companies listed on SEHK, with a total market capitalization of HK$36.95 trillion ($4.7 trillion) as of July, and total market turnover stood at HK$12 trillion from January to July, according to HKEX data. From 1993 to July this year, the local stock market had raised HK$12.36 trillion.

HKEX is looking for new business sources to boost and diversify its initial public offering (IPO) business. With Hong Kong and the 10 member states of the Association of Southeast Asian Nations having cultivated deep trade and investment linkages, ASEAN business enterprises would be the next IPO business target as the bourse seeks to expand and diversify its operations.

In considering overseas listings, the United States remains a preferred destination for ASEAN technology titans, such as Sea Ltd — the holding company of Southeast Asia's largest e-commerce platform Shopee and Grab — the "Uber of Southeast Asia". Both companies went public on the US Nasdaq in 2017 and 2021, respectively. There are also firms in the manufacturing, hotel and life science sectors listed on the New York Stock Exchange and Nasdaq. Refinitiv data show that 33 ASEAN enterprises were listed on various US exchanges, with total capitalization of $186 billion as of Dec 15, 2021.

Singapore is popular for Malaysian companies when mulling overseas listings due to the close links between the two countries. According to Refinitiv, 34 ASEAN companies were listed in the city-state, with total capitalization of $33.9 billion as of Dec 15, 2021.

In terms of market capitalization contributed by ASEAN-listed firms, the Hong Kong bourse trails its US and Singapore counterparts. But, there is room to catch up. As of Dec 15, 2021, there were 84 companies that had headquarters or were incorporated in ASEAN and listed in Hong Kong, with total capitalization of $15.3 billion, accounting for about 3.3 percent of the number of listed companies and 0.3 percent of total market capitalization on HKEX, according to Refinitiv.