Hong Kong’s government-owned financial think tank is seeking the views of market practitioners on ways to bolster liquidity in the city’s capital market and diversify investment products.
Last year, Hong Kong was the world’s top initial public offering hub, with 119 new listings totaling HK$285.8 billion (US$36.6 billion), up from 66 worth HK$87.6 billion in 2024.
The increase was driven by renewed global capital flows into the Hong Kong and China equity markets, fuelled by the artificial intelligence investment boom in the Mainland.
“However, for the long term, a robust framework is necessary to enhance market liquidity and continue attracting international capital,” Rocky Tung, who was appointed executive director of the Financial Services Development Council (FSDC) last November, says in an interview with Asia Asset Management.
The following month, the think tank began consulting more than 500 senior executives from financial institutions on the so-called Four I’s – issuers, investors, intermediaries and [financial] instruments.
The consultations focus on broadening market participation, accelerating settlement processes, and bolstering market resilience, zeroing in on several key matters, including dual-class shares, where a company can issue two or more classes of common shares with unequal voting rights.
Hong Kong has permitted dual-class shares since 2018, but the number of companies offering the structure remains relatively low compared to markets like the US.
“We are currently reviewing the requirements to determine whether to lower the threshold,” Tung says.
Another matter is the feasibility of including securities of companies with secondary or dual-listings in the southbound channel of the Hong Kong-China Connect Scheme. The southbound channel allows investors in the Mainland to invest in securities listed in Hong Kong.
The consultations also cover ways to diversify derivatives and debt offerings to attract institutional investors such as insurance companies and pension funds.
“This [diversification] aims to retain these patient capital by offering a range of risk hedging tools,” according to Tung.
He says the Hong Kong government has already done a lot to attract international financial institutions, pointing to the re-domiciliation of AXA Hong Kong and Macau, and Canada’s Manulife Financial Corporation in the city as an example. “To meet these insurers’ investment appetites, the city needs to develop a diverse range of financial products,” he says.
There are around 40 firms worldwide specialising in insurance-linked securities such as catastrophe bonds. According to Tung, the government should attract these firms to Hong Kong to strengthen the city’s market ecosystem.
The FSDC will use feedback from the consultations in a report with recommendations to the government on how to enhance market liquidity. The report will be released in the middle of this year.
