Hong Kong Gold Rush Weekly: HSBC HK joins China's payment system, I&T growth, more SME support, countdown to FinTech Week, exchange's profits up, and IPO recovery
5 minutes read for your next opportunity in the Asian financial hub
Hi, this is Yifan in Hong Kong. Here’s what you should know about business and investment opportunities that happened in the Asian hub this week.
Business signals:
HSBC HK joined China’s cross-border payment system (CIPS)
HK tech chief told the VC community that I&T is “poised to reach new heights”
HKMA launched five measures to support SME financing
Final countdown to Hong Kong FinTech Week 2024
Market pulses:
The stock market closed at 20,590.15 points, down 0.68%
HK exchange operator’s revenue hits quarterly record
Sizeable IPOs fueled optimism in the new listing market
Business signals
#HSBC HK unit joins China’s cross-border payment system
HSBC Hong Kong became a direct participant in China’s Cross-Border Interbank Payment System (CIPS), according to the company’s statement.
HSBC Asia Pacific Co-Chief Executive David Liao told a banking event in Beijing that doing so allows the lender to play an integral role in supporting the growing demand from its clients for solutions that facilitate renminbi trade.
The renminbi is the fourth-largest international trade currency, data from the global bank messaging network SWIFT showed; As the largest offshore renminbi hub globally, Hong Kong handles around 75% of international renminbi settlements, according to the government.
Introduced in 2015, CIPS streamlined renminbi transactions by replacing a fragmented network. As of the end of September, the system had 153 members. It has gained more attention after Russian banks were banned from SWIFT following its 2022 conflict with Ukraine.
Liao said that the US dollar is still the dominant currency worldwide, but its influence will evolve with continued policy developments in China and technology that enables the innovation of alternative instruments and systems.
Read more on Liao’s speech -
https://www.gbm.hsbc.com/en-gb/insights/innovation/sibos-day-one
Check the full list of direct participants -
https://www.cips.com.cn/en/about_us/about_cips/direct_participants_list/index.html
#Officials: HK’s I&T ‘poised to reach new heights’ through closer cross-sector ties
Hong Kong’s technology chief on Thursday told a local flagship venture capital forum that the city’s innovation and technology (I&T) development “is poised to reach new heights” with the recently announced policy initiatives package to develop closer collaboration among government, business, and academia.
“I&T is the pivotal force to unlock new pathways to economic growth and the societal advancement of our country and Hong Kong,” Secretary for Innovation, Technology and Industry Sun Dong said in his opening remarks during the Cyberport Venture Capital Forum.
Last Wednesday, Chief Executive John Lee Ka-chiu announced a broad range of policy measures in his third Policy Address to boost Hong Kong’s I&T strength. These include the establishment of a HK$10 billion (US$1.29 billion) industry-oriented fund to channel more investment in strategic emerging industries, such as artificial intelligence, robotics, and smart devices.
The existing Innovation and Technology Venture Fund will also be enhanced by reallocating HK$1.5 billion to create joint funds that focus on tech startups. Since its inception in 2017, the fund has so far included 54 startups in its investment portfolio that covers areas such as financial technology, biotechnology and e-commerce, according to the Innovation and Technology Commission.
In addition, the city will introduce the Pilot I&T Accelerator Scheme, designed to woo established startup service providers both locally and internationally.
Themed "Innovation Challenger: Building New Venture Visions", the two-day event gathers hundreds of venture capitalists and entrepreneurs in Cyberport — a startup incubation park that has accumulated more than HK$41.2 billion in total fundraising, of which HK$3.7 billion was made last year alone, up 23% year-on-year. Its community members include the booking platform Klook and licensed cryptocurrency exchange Hashkey.
Cyberport Chairman Simon Chan Sai-ming said in his welcome speech that the new initiatives announced in the Policy Address will “inject new impetus” into I&T growth, powering the high-quality development of Hong Kong's digital economy.
He said that Cyberport will continue to explore investment opportunities in the Middle East, ASEAN, and regions involved in the Belt and Road Initiative to offer more diverse financing channels for the city's technology companies.
#HKMA launches five measures to support SME financing
Hong Kong’s de facto central bank is ramping up efforts to support small and medium enterprises (SMEs) with five initiatives aimed at facilitating access to bank financing and encouraging confidence in business transformation.
The Hong Kong Monetary Authority’s (HKMA) package, which was unveiled on Oct.18, includes an immediate reduction of the countercyclical capital buffer ratio from 1% to 0.5%. This buffer is designed to reinforce the resilience of the financial system by mandating banks to accumulate extra capital during economic upswings and relax capital-to-asset ratios during downturns.
HKMA CEO Eddie Yue Wai-man said a moderate reduction in the countercyclical capital buffer is appropriate to enhance bank support for Hong Kong’s economy given the challenges SMEs are facing. He added that future adjustments will be contingent on broader domestic economic growth and market conditions.
HKMA Deputy Chief Executive Arthur Yuen said that internal estimates suggest the move to release HK$300 billion (US$38.6 billion) to HK$400 billion in capital for banks, sending a clear signal to SMEs that the banking industry, the HKMA, and the government all stand behind them.
The 16 banks actively engaged in SME lending, such as HSBC and Bank of China (Hong Kong), have collectively allocated more than HK$370 billion of dedicated funds for SMEs within their loan portfolios.
The HKMA highlighted that these funds are intended to facilitate SMEs in accessing essential financing to navigate the changing business landscape, adding that banks will regularly reassess and potentially increase the size of these funds in response to the evolving needs and progress of SMEs.
Read more on the official press release -
https://www.hkma.gov.hk/eng/news-and-media/press-releases/2024/10/20241018-4/
Other measures comprise launching more credit products and services, increasing the partial principal repayment options, and accelerating the implementation of the enhancements to the SME financing guarantee program.
Under the new regulation, businesses with an annual turnover of up to HK$500 million will be covered — a substantial increase from the previous cap of HK$100 million.
#One day until Hong Kong FinTech Week 2024 Kick-off
The Hong Kong FinTech Week 2024 will commence on Oct. 28 and run through Nov.1. As the city’s largest and most impactful event for global finance and technology leaders, it is anticipated to draw over 30,000 attendees from more than 100 economies, featuring 800+ top speakers and 500+ fintech startups.
Visit Hong Kong FinTech Week’s website for the latest speaker list and agenda to plan your attendance. https://www.fintechweek.hk/
Market pulses
Benchmark Hang Seng Index (HSI) lost 0.62% last week, closing at 20,590.15 points on Friday.
#HK exchange operator profit tops estimates on policy tailwinds
Hong Kong’s bourse operator has reported a profit jump and record third-quarter revenue in the three months through September, as the Chinese mainland’s stimulus measures and interest rate cuts globally boosted trading volumes across markets.
Hong Kong Exchanges and Clearing’s (HKEX) net profit rose 7% year-on-year in the third quarter to HK$3.15 billion (US$405 million), beating market expectations.
Revenue grew 6% to HK$5.37 billion from the same period last year, recording its best performance for the third quarter, HKEX’s earnings report said. But it was 1% lower than the previous three-month period, when incomes hit a record second-quarter high.
Core business revenue reached HK$4.85 billion, up 3% year-on-year, driven by higher trading and clearing income from across the cash, derivatives and commodities markets.
Bonnie Chan, chief executive officer of HKEX, said “the vibrancy and diversity” of Hong Kong’s markets were on full display in late September thanks to policy tailwinds.
Shares listed in the city were on a tear after the US Federal Reserve kicked off its monetary easing cycle and Beijing unveiled a sweeping stimulus package at the end of the third quarter to reboot the world’s second-largest economy’s growth engine.
The much-needed trading euphoria brought the Hong Kong stock market an advance of nearly 20% in the quarter, although the rally appeared to fade quickly after this month.
“Looking ahead, we remain steadfast in our commitment to further enhancing the vibrancy, resilience, and competitiveness of our markets,” Chan said.
She added that the exchange operator is well-equipped to handle the changing macro-environment and drive sustained growth by consistently expanding its product portfolio, forming international partnerships, and investing in infrastructure.
#Mega listings return in a sign of IPO pickup
Hong Kong exchange’s listing business, which had long suffered from a stagnant new offering market, also picked up. In the three months ending September, the city’s bourse saw 15 initial public offerings, raising HK$42.2 billion (US$5.43 billion), more than tripling the funds raised in the first half.
Among them, Chinese home appliances giant Midea Group raised nearly US$4 billion. This was Hong Kong’s largest fundraising since the listing of video-sharing app Kuaishou Technology in 2021, and the second-largest new offering globally this year behind Lineage Inc's IPO in New York which raised US$5.1 billion.
Last week, Hong Kong saw two sizeable IPOs of the year: Chinese self-driving tech company Horizon Robotics and state-owned drinks maker China Resources Beverage.
Horizon Robotics raised HK$5.4 billion (US$696 million) after pricing its offer price at the upper end of the range. Its shares finished the trading debut 2.8% higher on Thursday.
The tech firm’s trading debut came one day after China Resources Beverage raised US$650 million in its new share sale on Wednesday.