159
In July 2017, Bond Connect was launched to further promote the development of the bond
markets between Hong Kong and Mainland China. Bond Connect is a new mutual market
access scheme that allows investors from Mainland China and overseas to trade in each
other's bond markets, through connections between the related Chinese and Hong Kong
financial infrastructure institutions. Bond Connect is expected to strengthen Hong Kong’s
position as the financial securities gateway to Mainland China, allowing overseas investors
to trade onshore bonds from Hong Kong. Bond Connect may also be the gateway for Hong
Kong to become the global Islamic finance centre, as it has been actively issuing sukuk
since 2014; it introduced a 10-year sukuk in February 2017.
The UNCTAD World Investment Report 2017 has labelled Hong Kong as a highly attractive
market for FDI. Global FDI to Hong Kong amounted to USD108 billion in 2016, placing it in
the fourth position globally, behind Mainland China (USD 134 billion). Hong Kong also
ranks seventh among the world’s top stock exchanges, and third among Asia’s stock
exchanges based on market capitalization as at end-June 2017, as shown in Table 4.27.
Table 4.27: Market Capitalization of the World’s Top Stock Exchanges
Worldwide
Ranking
Ranking
in Asia
Market Capitalization
(USD billion)
US (NYSE Euronext) 1 20,658.99
US (Nasdaq) 2 8,745.95
Japan (Japan Exchange Group) 3 1 5,501.98
China (Shanghai) 4 2 4,536.96
Europe (NYSE Euronext) 5 4,034.23
UK (London Stock Exchange Group) 6 4,004.81
Hong Kong 7 3 3,674.30
China (Shenzhen) 8 4 3,347.50
Canada (Toronto) 9 2,128.06
Germany (Deutsche Borse) 10 1,993.80
Source: Bloomberg, World Federation of Exchanges (WFE)
In December 2016, Hong Kong introduced its second Stock Connect with Mainland China. Since
then, stocks have been recording higher turnovers. Stock Connect strengthens the Stock
Exchange of Hong Kong as the number of IPOs in 1Q 2017 is the highest in more than 2
decades (KPMG, 2017), reflecting strong demand in the primary market. This scheme gives
Hong Kong an opportunity to be the “super connector” between China and the world.
Overall, Hong Kong features as a strong IFC, with a financial sector that is much larger relative
to its size and population; it is also dominated by international companies. Hong Kong largely
focuses on developing its capital markets to attract international issuers and investors,
particularly serving as a prime regional centre that facilitates market access for Mainland
China. Table 4.28 summarises Hong Kong’s global position and in Asia.