HKEX: Positioning for the future by building a diversified asset ecosystem; four major directions to consolidate Hong Kong's status as an international financial center.

HKEX CEO's latest blog post, "CEO Blog: Positioning for the Future by Building a Diversified Asset Ecosystem," noted that the Hong Kong SAR Government recently published Hong Kong's first five-year plan for economic and social development, proactively aligning with the national 14th Five-Year Plan. One of the most important elements of the plan is to consolidate and enhance Hong Kong's status as an international financial centre. As the core infrastructure of Hong Kong's financial market, HKEX should shoulder the important task of enhancing Hong Kong's status as an international financial centre. Its long-term strategy of building a diversified asset ecosystem is also fully aligned with the arrangements in the national 14th Five-Year Plan and Hong Kong's five-year plan for strengthening the functions of an international financial centre. The article noted that in the future, HKEX will focus on building a more complete and internationally competitive diversified asset ecosystem and actively promote the implementation of Hong Kong's five-year plan. In terms of "what the world needs" and "what the country needs," over the past two years, amid changes in the geopolitical environment and the rise of China's technological innovation, more and more international investors have begun to diversify their investments and turn their attention to Asia, which has higher growth potential. Investing in China has become a must for international investors. Today, international investors are no longer debating "whether China can be invested in." They not only want to invest in Chinese equities, but also want to diversify their allocations into other asset classes. On the other hand, China's economic transformation and industrial upgrading are accelerating. Technology companies and companies "going global" have strong financing needs, and demand is also very strong for diversified investment allocation and orderly "going global" by mainland capital. As Chinese assets usher in a historic revaluation, demand for the RMB as an investment currency is beginning to rise, and the country is vigorously promoting RMB internationalisation. Facing these new trends and new demands, HKEX's answer is to build a more comprehensive and internationally competitive diversified asset ecosystem by connecting "people, products and venues." On "people," HKEX will continue to bring together mainland and international issuers, investors, financial institutions and long-term capital to broaden the market participation base; on "products," HKEX will, while consolidating its equities business, further expand diversified products and risk management tools such as fixed income, currencies and commodities; on "venues," HKEX will continue to enhance market infrastructure, promote the application of financial technology and market connectivity, and further enhance Hong Kong's functions, resilience and long-term competitiveness in global capital allocation, RMB internationalisation and risk management. Specifically, HKEX plans to proceed in the following four directions: 1. Enhance the competitiveness of the international financing platform The article noted that world-leading fundraising capability has always been the pride of Hong Kong's stock market and is also a reform direction to which HKEX attaches great importance. This year, the IPO market has continued last year's activity, and more than 80% of new listings had international institutions participating as cornerstone investors. In order to enhance Hong Kong's competitiveness as an international financing platform, HKEX keeps pace with the times in response to market changes and, by reference to the advanced experience of international markets, continues to optimise the listing regime. Since 2018, HKEX has carried out multiple listing reforms closely in line with economic development trends, precisely in order to attract different types of companies, especially new economy companies, to list and to provide global investors with richer investment opportunities. Last year, HKEX, by reference to international market experience, optimised the IPO pricing and allocation mechanism, increasing the allocation ratio in new listings for institutional investors with greater bargaining power and improving IPO pricing efficiency. In July this year, HKEX launched a new round of listing regime reforms, including relaxing the listing requirements for companies with weighted voting rights, facilitating listings in Hong Kong by companies already listed overseas, providing greater flexibility for biotechnology companies and specialist technology companies, and allowing all companies to choose to submit listing applications on a confidential basis. At present, HKEX is conducting the second-stage consultation on enhancing the competitiveness of the listing regime, proposing to optimise the rules on discloseable transactions, connected transactions and spin-offs, reduce compliance costs, and increase the flexibility of listed companies in mergers and acquisitions, restructuring and business spin-offs. In the future, HKEX will also launch consultations on optimising the listing regimes for specialist technology companies and GEM. In addition, in terms of international cooperation, HKEX enhances liquidity in both markets and creates win-win outcomes through initiatives such as jointly developing indices with international exchange partners and encouraging cross-listing of ETFs. In the future, HKEX will continue to hold key promotional events in the Middle East, ASEAN, Belt and Road countries and regions and elsewhere to introduce the advantages of the Hong Kong market, deepen financial cooperation with local exchanges, and attract more international companies to seek primary or secondary listings in Hong Kong. In short, HKEX will continue to optimise the listing regime, trading platform and issuer services, enhance Hong Kong's competitiveness as an international financing platform, and facilitate quality mainland and international enterprises to raise funds in Hong Kong. 2. Deepen the breadth and depth of the secondary market ecosystem The article mentioned that the prosperity of the primary market is inseparable from the activity of the secondary market. Since last year, under the combined effect of international investors refocusing on Chinese assets and multiple reforms in Hong Kong's securities market, trading in Hong Kong's stock market has become increasingly active. However, under the diversified asset ecosystem strategy, HKEX still has a lot of work to do, one major focus of which is to enrich product offerings and enhance liquidity, and to deepen the breadth and depth of the secondary market ecosystem. In terms of enriching products, HKEX encourages the issuance of different types of ETF products and has vigorously entered the index business, launching the HKEX Tech 100 Index and multiple cross-market equity indices to facilitate issuers in developing diversified investment products linked to these indices. In August this year, when China Securities Regulatory Commission Chairman Wu Qing came to Hong Kong to attend the listing ceremony for offshore RMB government bond futures, he said that the CSRC supports strengthening cooperation between index companies in the two places, launching more indices based on Chinese assets, and promoting industry institutions in both places to launch more ETF products, so as to jointly enhance the international influence of Chinese indices and Chinese assets. HKEX pays great attention to this opportunity and looks forward to cooperating with mainland peers to create product synergies and make it more convenient for global investors to allocate to Chinese assets. In order to facilitate investors in managing stock market risk and enriching investment strategies, HKEX has also accelerated the pace of derivatives development. Since the beginning of the year, it has added 38 weekly stock options, and in November it will add 12 more stock option classes, while also providing stock option contracts with weekly and monthly expiries. In the future, HKEX will continue to develop more stock indices and launch more short-dated stock options, thematic futures and options, and so on, further enriching the stock derivatives ecosystem. In terms of improving trading efficiency and market liquidity, Hong Kong's stock market has in recent years implemented reforms such as simplifying board lot sizes and lowering minimum spreads, with initial results beginning to show. At present, HKEX is consolidating market views on shortening the stock market settlement cycle, hoping to lead the industry towards a T+1 settlement cycle as soon as possible and improve capital efficiency in Hong Kong's stock market. In terms of optimising mutual market access, HKEX and its mainland partners are preparing to include real estate investment trusts (REITs) in Stock Connect and to include RMB stock counters in Southbound Stock Connect, hoping to further broaden the investment scope of Stock Connect and also to provide overseas investors investing in mainland A-shares with richer risk management tools, thereby attracting more international capital to allocate to Chinese assets through Hong Kong. In addition, HKEX is also committed to continuously enhancing market convenience for investors, including supporting paperless securities reform and extending trading hours. HKEX is actively studying extending after-hours derivatives trading. As for extending stock market trading hours, HKEX will begin by leading market discussion and seek a plan acceptable to all parties in the market. 3. Expand the fixed income, currency and commodities ecosystem and promote RMB internationalisation The article noted that any international financial centre that wants to attract and retain massive amounts of capital must provide as rich a "shelf" as possible, not only with a dazzling array of equity products, but also with a rich and diverse range of fixed income products and commodities. Equity products are Hong Kong's traditional strength, but the fixed income and commodities businesses have only just started and require substantial investment. At the same time, RMB internationalisation is entering a new stage, with the focus on enhancing the RMB's function as a currency for investment and financing. If the Hong Kong market can use the offshore RMB liquidity pool to provide a rich range of RMB-denominated fixed income, currency and commodity products, it will certainly increase international investors' willingness to hold RMB assets for the long term and will also enhance the attractiveness of the international financial centre. Therefore, the building of Hong Kong's fixed income and commodities ecosystem should seize the opportunities brought by RMB internationalisation. In building the fixed income and currency market, the Securities and Futures Commission and the Hong Kong Monetary Authority jointly published Hong Kong's "Roadmap for the Development of the Fixed Income and Currency Market" last year, aiming to build Hong Kong into a global fixed income and currency centre and consolidate Hong Kong's core position as a global offshore RMB hub. HKEX's work plan is fully aligned with the direction of the Roadmap. HKEX should serve as the "construction team" implementing the Roadmap, fully implement the initiatives in the Roadmap, and improve the offshore RMB ecosystem. First, HKEX should enrich RMB fixed income assets. Bonds are the most important category. HKEX will continue to attract more mainland, Hong Kong and international issuers to issue and list bonds in Hong Kong, especially RMB bonds (dim sum bonds). As of 24 September, the issuance scale of dim sum bonds listed on HKEX this year had reached RMB266.9 billion, up 14% year on year, and the issuance scale this year is expected to reach a new high. While attracting bond listings, HKEX is also actively preparing the first offshore RMB bond index. With an index, the market can further develop bond ETFs and other index-linked products, facilitating RMB bond asset allocation. HKEX hopes to form a virtuous cycle: bond issuance brings more investable assets, more indices and ETF products, and new investment demand in turn supports more issuance. Second, after increasing the supply of RMB bond products, risk management capability must also keep up. Therefore, HKEX launched five-year China government bond futures this year to provide international investors with RMB interest rate risk management tools. Government bond futures form a perfect synergy with Bond Connect and Swap Connect: Bond Connect addresses RMB bond investment, Swap Connect provides flexible over-the-counter interest rate risk management, and government bond futures provide standardised on-exchange hedging and price discovery tools. In the future, HKEX hopes, when conditions are ripe, to gradually enrich key tenors so that investors can manage bond risk across different durations and promote the formation of a more complete RMB interest rate curve in the offshore market. In addition, the repo market is an important financing foundation of the fixed income market. HKEX is studying the establishment of infrastructure for an offshore RMB bond repo market and exploring central clearing services for bond repos, hoping to enhance the liquidity and financing efficiency of offshore RMB bonds. In terms of commodities, Asian economies continue to lead the world, generating strong commodity demand, but Asia does not have a commodity market with global influence; China is already the world's largest commodity consumer and importer, but its pricing power in the global commodity market is clearly insufficient. These factors provide an entry point for Hong Kong to develop a commodities ecosystem. HKEX will rely on its London Metal Exchange (LME) and precious metals business to support the building of Hong Kong's commodities ecosystem. As the world's largest base metals market, LME will this month launch the LME Shanghai hot-rolled coil futures contract in cooperation with the Shanghai Futures Exchange, helping Chinese commodity prices "go global" and enhancing the international influence of Chinese prices. In addition, the number of LME-approved delivery warehouses in Hong Kong has increased to 19, greatly facilitating mainland metals traders. In the future, LME will cooperate with warehouse operators, logistics service providers and other market stakeholders to seek to further expand Hong Kong's storage capacity and enhance the functions of the warehousing network. HKEX is also exploring how to better connect Hong Kong's commodities market with other markets in the Greater Bay Area. LME Clear also further optimised the use of offshore RMB as collateral this year. This not only helps advance RMB internationalisation, but also provides convenience for participants in the Chinese market. In precious metals, HKEX has already reactivated USD-denominated gold futures this year, and will soon launch redesigned RMB-denominated gold futures to expand the use scenarios of the RMB in investment, commodity trading and risk management. 4. Upgrade market infrastructure The article concluded by noting that building a diversified asset ecosystem must be supported by well-developed market infrastructure. HKEX will continue to invest in and independently develop future-oriented market infrastructure, including building the Orion Derivatives Platform and upgrading the Orion Cash Platform. The Orion Derivatives Platform will enhance the trading, post-trade and risk management capabilities of Hong Kong's derivatives market and will be built in a modular way to support the future addition of new products, optimisation of market microstructure and introduction of other functions. The Orion Cash Platform will optimise post-trade services in the cash market in phases, enhance settlement and clearing infrastructure, and provide market participants with more efficient, seamless and modern services. The construction of the Orion platform will support HKEX in launching new products more flexibly and connecting more market participants in the future. HKEX is also studying the establishment of a tokenisation platform supporting multiple assets, using commodities and carbon credits as pilots to explore tokenisation applications. HKEX is applying artificial intelligence to work such as market surveillance and compliance supervision of listed companies to improve operational efficiency. In payments, HKEX is working with the Hong Kong Monetary Authority on a pilot project to use "e-HKD" to pay prepaid margin for after-hours trading sessions, enhancing the risk management capability of the derivatives market during non-banking hours. HKEX will also work closely with the HKMA to accelerate the commercialisation, internationalisation and modernisation of CMU OmniClear, upgrade the Central Moneymarkets Unit (CMU), promote interconnection between local central securities depository platforms for stocks and bonds, and unlock the potential of cross-asset synergies. In addition, Bond Connect Company, a joint venture between HKEX and the China Foreign Exchange Trade System, is developing an electronic trading platform for Hong Kong fixed income and currency products to improve the efficiency of bond trading. Through implementing these strategic directions, HKEX hopes to attract more global long-term capital, support the development of quality enterprises, and advance RMB internationalisation, thereby better connecting the needs of China and the world, consolidating and enhancing Hong Kong's status as an international financial centre, and making due contributions to the country's 14th Five-Year Plan!