Chen Yiting: Connecting Asian Capital Markets through Institutional and Product Innovations.

On April 15th, HKEX CEO Charles Li published a blog post stating that with a large number of investors and capital pouring in, the market value of Asian stock markets has quadrupled since 2000, reaching $34.4 trillion by the end of 2024, with strong growth momentum. The amount of investment from international investors in Asian stock markets has doubled from 2014 to 2024, reaching about $6 trillion. More importantly, the Asian region also holds enormous growth potential. Asian capital markets are as busy as the autumn market, especially now that the global geopolitical situation is complex and volatile, with many international partners more eager than ever to participate in Asian capital markets. In fact, the investment opportunities in the Asian region are indeed very attractive. China has the largest and most exciting growth opportunities and capital pool in the Asian region. Other markets in Asia also have many globally innovative companies, as well as a large and diverse group of investors. HKEX has always actively embraced interconnection and positioned itself as a super connector. The mutual market access mechanism between Hong Kong and mainland China has become a model for market infrastructure and regulatory authorities to jointly promote cross-border capital flows. Driving product innovation and deepening regional connectivity Charles Li stated that in order to implement the strategy of expanding the product ecosystem and developing index business, HKEX has been developing benchmark indices that can promote product innovation and deepen connections between markets. Recently, HKEX has collaborated with the exchanges in Malaysia and South Korea to launch co-branded indices focusing on the most dynamic companies in their respective markets. The weightings of these two indices are approximately 60% for Hong Kong-listed companies and 40% for overseas-listed companies, meeting the standards for ETF inclusion in the Hong Kong Stock Connect, aiming to promote the development of more relevant ETF products and provide Chinese mainland investors with more diverse cross-market opportunities. It is gratifying that several issuers are already interested in launching ETFs tracking these two indices in Hong Kong. Furthermore, these indices also provide a foundation for launching more diverse structured products and derivatives. By constructing cross-market benchmark indices, we can introduce various futures, options, and other risk management tools, thereby deepening liquidity, enhancing market price discovery, and facilitating investors to deploy more diverse Asian investment strategies. The next stage of product innovation will further enhance regional connectivity, providing more diverse investment tools according to the needs of local investors, enabling them to hedge and construct investment portfolios more effectively, thus attracting different types of investors to participate in the Hong Kong market. Promoting cross-market listings to build a new ecosystem of Asian capital interconnection In addition to product innovation, HKEX is also committed to promoting platform development. The recent signing of a memorandum of understanding with the exchange in Malaysia is another result of the continued cooperation between Hong Kong and the Southeast Asian markets. HKEX has previously established recognition arrangements with stock exchanges in Thailand, Indonesia, Singapore, and will have more similar arrangements in the future. The memorandum of understanding signed between HKEX and the exchange in Malaysia will explore how to develop more dual listing pathways. Currently, over 150 Southeast Asian companies are listed in Hong Kong, with a total financing amount exceeding $4.3 billion, making Hong Kong the most favored overseas listing destination for Southeast Asian companies. As more high-quality companies from Malaysia and Southeast Asia emerge, expanding into international markets may naturally become the next step for these companies. Through unique two-way interconnections, HKEX can complement market partners, connecting Asian enterprises with international and mainland Chinese capital, allowing global and mainland Chinese investors to seize the development opportunities in emerging Asian markets. Developing new products, building more platforms to enhance market liquidity in Asia Charles Li pointed out that by developing new products and building more platforms, he hopes to attract more market participants from around the world to converge in Hong Kong, share opportunities in Asia, and thus enhance the liquidity of the entire Asian market. This process will not happen overnight, and there are certainly many challenges, from the ever-changing geopolitical environment to the daunting operational challenges. However, the ultimate outcomea vibrant, globally connected, and capable of driving the development of the Asian market ecology in the next decade and beyondis worth striving for and overcoming difficulties. The 40th annual meeting of the Association of Southeast Asian Securities Exchanges (AOSEF) will be held in Hong Kong next week, where representatives from 17 Asian exchanges will gather in Hong Kong. Charles Li looks forward to working with partners to establish common goals and jointly promote cross-market interconnection. Through deepening regional cooperation and building connecting bridges, Hong Kong can fully leverage its existing strengths to attract more capital to Asia, strengthen the regional capital pool, optimize market price discovery functions, enhance the resilience of capital markets, and better serve businesses, investors, and economies in Asia and globally.