2022 is about to become history, and we will usher in a new year. Looking back on the past year, the conflict between Russia and Ukraine caused global prices to soar, the Fed's successive sharp interest rate increases triggered sharp fluctuations in global markets, and many countries around the world faced economic recession. In the face of a series of uncertain factors, as one of the most internationalized international financial centres, Hong Kong's financial market will inevitably fluctuate greatly.

However, Hong Kong, which has come out of the haze of the epidemic and has become increasingly stable, on the one hand, by actively promoting measures such as expanding "connectivity", constantly strengthening cooperation with the mainland and promoting the internationalization of RMB in all directions, the role as a "super contact" between the mainland and the world has become increasingly prominent. On the other hand, we should actively promote rule innovation and the development of financial technology and green finance, and strive to maintain an international leading position in many financial segments. It can be said that flying across the clouds is still leisurely.

Looking forward to 2023, Hong Kong's financial market is worth looking forward to, both in terms of the expansion of traditional markets and the innovation of institutions and products.

Market performance2022: the fourth largest amount of financing in the world2023: overall performance will be better

In 2022, global stock markets fluctuated sharply due to many uncertainties in global politics and economy, and Hong Kong stocks were no exception.

The Hang Seng index has fallen over the past two years, falling to 14597.31 on October 31, 2022, its lowest level since the subprime crisis and down nearly 10, 000 points since the start of the year. Subsequently, with the stimulus of loosening policies such as deregulation of the epidemic and support for real estate liquidity since November 2022, Hong Kong stocks began a big rebound in bottom valuation repair.

Looking forward to 2023, Zhu Jiang, director and director of the cross-border investment banking business line of Anxin International Securities (Hong Kong) Co., Ltd., believes that the market generally expects the Federal Reserve to stop raising or even cutting interest rates after the second half of 2023. At that time, the recovery of overseas liquidity is also expected to further boost the valuation of Hong Kong stocks. At the same time, according to the guidelines of the recent Central Economic work Conference, China will enter a new expansion cycle. The stock market, the economy and the RMB exchange rate are all likely to strengthen in 23 years. Under this background, Hong Kong stocks are expected to hand in satisfactory transcripts in 2023.

IPO

2022: the fourth largest amount of financing in the world

2023: overall performance will be better

The Hong Kong Stock Exchange said a few days ago that macroeconomic and geopolitical factors reduced global IPO market activity, but the Hong Kong market still showed resilience compared with other foreign markets, and listing fund-raising activities rebounded in the second half of the year. As of November 30, Hong Kong Exchanges and Clearing had a total of 69 new shares listed, raising 87.8 billion yuan, of which 42 new shares were listed in the second half of the year, almost twice as many as in the first half of the year. This year, a total of 51 new shares came from the new economy industry, accounting for 72.7% of the funds raised during the period.

According to the report "2022 Review and 2023 Prospect of IPO Market in mainland China and Hong Kong" released by Deloitte China Capital Market Services, the number of new shares and financing in Hong Kong for the whole year are the lowest in the past 10 years, and a total of 82 new shares are expected to be issued in 2022, raising a total of HK $102 billion. Compared with 2021 (97 new shares, raising HK $331.4 billion), the number of new shares fell by 15 per cent and the total amount of financing decreased by 69 per cent. However, the amount of IPO raised by HKEx ranks fourth among global exchanges with two super-large new shares, China China Free and Tianqi Lithium.

Looking ahead to 2023, Deloitte expects that 110 new shares in Hong Kong will raise about HK $230 billion, and that more mainland companies will list in Hong Kong in the form of H shares, many of which will become listed companies. Such as the introduction of RMB-denominated stock trading counters, the inclusion of overseas companies listed in Hong Kong in Hong Kong Stock Connect and the regulatory reforms of FINI will help support the listing of "dual-currency, dual-share" and overseas enterprises and specialty technology companies in Hong Kong during the year, and consolidate Hong Kong as the world's largest offshore RMB business centre.

Ou Zhenxing, managing partner of Deloitte in South China, said: "as it takes time for these new and positive developments to promote and stimulate economic and business activities, we expect the performance of the Hong Kong IPO market to slow at the beginning of next year. However, the momentum of the market will increase later, so we are sure that the overall performance of the Hong Kong IPO market will be better in 2023. It will continue to highlight its role as a 'super contact' for the mainland to connect with the world or the mainland around the world. "

Zhu Jiang suggested that in the coming year, Hong Kong should focus on improving market liquidity, including strengthening connectivity with China in the trading system to attract Beishui, and launching new rules for the listing of proprietary technologies (18C) as soon as possible. Update and improve the listing system to attract domestic and foreign capital.

Derivative products

2022: daily turnover of RMB futures rose 68%

2023: develop into an Asian risk management center

Hong Kong has the leading derivatives market in Asia and occupies an important position in the international financial market.

In 2022, the trading volume of derivatives in Hong Kong maintained a strong growth, the average daily turnover of futures and a number of products in the derivatives market set a new record. In the first 11 months of 2022, the average daily trading volume of futures and options rose 9 per cent from the same period last year to more than 129600 contracts, with the average daily trading volume of the most popular RMB currency futures rising 68 per cent from the same period last year to nearly 18500 contracts, according to the Hong Kong Stock Exchange.

In 2022, the diversity of derivatives in Hong Kong will be further enriched. In August, MSCI China A50 Interconnection Index derivative warrants were listed on the Hong Kong Stock Exchange, further consolidating Hong Kong's position as an offshore A-share risk management center; in November, the HKEx launched Hang Seng Technology Index futures options and made a number of improvements to the existing Hang Seng Technology Index derivatives. As of September 30 this year, the number of unlisted structured investment products approved by the SFC increased by 60.3% year-on-year to 234, according to the Hong Kong Securities Regulatory Commission.

The derivatives mechanism in Hong Kong is also expanding in 2022. In July, the people's Bank of China, the Hong Kong Securities Regulatory Commission and the Hong Kong Monetary Authority jointly announced that they would carry out cooperation on the interconnection of interest rate swap markets between Hong Kong and the mainland ("swap"), so that investors at home and abroad can connect infrastructure institutions in Hong Kong and the mainland to participate in the interest rate swap market between the two places.

Looking ahead, HKEx said that preparations for treasury bond futures and over-the-counter market maker mechanisms for RMB trading are under way and are expected to be launched one after another in 2023. In the long run, as Hong Kong develops into a risk management centre in Asia, providing more and more renminbi risk management tools and the widespread use of derivatives trading in China, Hong Kong's fixed income derivatives market has plenty of room for development in the long run, said Mr CEO of HKEx.

Listing system

2022: steady progress of reform

2023: 18C in the first half of the year

Although the performance of the IPO market is not satisfactory this year, the pace of reform and innovation of Hong Kong Exchanges and Clearing's listing system has never stopped.

On January 1st, the listing mechanism of Hong Kong Special purpose acquisition Company (SPAC) was officially launched. Hong Kong's first SPAC Aquila Acquisition Corporation was listed on Hong Kong Exchanges and Clearing's main board on March 18. So far, 14 companies have submitted applications, of which 4 have completed listing.

SPAC is a shell company whose IPO aims to inject high-quality assets into an ordinary listed company through mergers and acquisitions within a preset period of time after listing (36 months as required by the Hong Kong Stock Exchange), and the life cycle of SPAC will end at the same time. If the merger cannot be completed within the specified time, HKEx will delist it and SPAC will need to liquidate and return all the proceeds plus accrued interest to shareholders on a pro rata basis.

The legal representatives of Hong Kong listed and proposed listed SPAC include a large number of heavyweight private equity investors and entrepreneurs, including Li Ning Co. Ltd., a well-known athlete entrepreneur, Chen Tong, a partner and founding member of Chunhua, Chen Delin, former chief executive of the Hong Kong Monetary Authority and former vice chairman of Standard Chartered Bank, Zhao Linghuan, chairman of Hony, and Ni Zhengdong, chairman of Qingke Group. And Wei Zhe, founding partner of Jiayu Capital and former executive vice president of BABA Network Co., Ltd. It is worth looking forward to which assets they will load into their SPAC in the coming 2023.

On October 19, the Hong Kong Stock Exchange published the consultation document on the listing system of Special Technology companies, proposing to expand the existing listing system in Hong Kong to allow special technology companies to list in Hong Kong (18C), and consult the public on this. This is the most important event in the reform of Hong Kong's listing system in 2022.

Looking forward to 2023, Zhu Jiang said that according to our understanding, 18C will probably be launched in the first half of 2023. If it is finally passed, it will have a significant impact on the financial market of Hong Kong. In 2018, the biotechnology reform made by the HKEx triggered an upsurge for related companies to list in Hong Kong. this further reform attracts the world's outstanding cutting-edge technology companies to list in Hong Kong. On the one hand, it can effectively support technology companies to obtain financing and speed up the virtuous circle of finance and technology; on the other hand, the new types of listed companies can bring more choices to investors and increase the scope of investment. This is of great significance to enhance the competitiveness and market attractiveness of the HKEx.

On December 16, the Hong Kong Stock Exchange issued a consultation document on the expansion of the paperless listing mechanism, which mainly includes simplifying the document submission process, issuing corporate communications by electronic means, and simplifying the appendix to the listing rules.

assets management

2022: the number of limited partnership funds has greatly increased

2023: the industry will usher in a new round of growth

The Hong Kong SAR Government is committed to developing Hong Kong as the preferred international asset and wealth management centre in the Asia-Pacific region. In 2022, Hong Kong's position as an international asset management centre will also continue to strengthen.

Hong Kong Limited Partnership Fund system (LPF), as an important part of it, has developed rapidly since it was officially launched in August 2020. According to the Hong Kong Limited Partnership Fund Association, nearly 600 LPF have been registered in Hong Kong in the two years to the end of October this year, and LPF is booming day by day.

In 2022, the Hong Kong SAR Government also spared no effort to co-operate with mainland regulators to strengthen Hong Kong's position as a global asset management centre. In September, the Hong Kong Special Administrative region Government and Shenzhen Qianhai Administration Bureau jointly issued 18 measures to support the joint development of venture capital in Qianhai, Shenzhen and Hong Kong ("18"), starting with broadening the scope of investment, simplifying the application process, and enhancing the flexibility of cross-border allocation of funds, so as to promote the docking of the pilot mechanism between Hong Kong LPF and Qianhai's foreign-invested equity investment management enterprises (QFLP). And promote the joint development of Shenzhen and Hong Kong private equity market.

In its global wealth report released in June 2021, the BCG forecast that by 2023, Hong Kong will overtake Switzerland to become the world's largest cross-border wealth management centre in terms of assets under management, with a compound annual growth rate of 9 per cent from 2020 to 2025, according to a research report published by the Hong Kong Monetary Development Council on consolidating Hong Kong's position as an excellent private wealth management hub in Asia.

Jiang Jingjing, founding president of the Hong Kong Limited Partnership Fund Association, partner of King & Wood Law firm and head of Hong Kong fund business, told our reporter that he was full of confidence in the development of Hong Kong's fund industry and the entire asset management industry. In his view, as the SAR Government continues to optimize the existing system and introduce more policies to directly or indirectly promote the development of Hong Kong's fund and asset management industry, Hong Kong's asset and wealth management industry is bound to usher in a new round of growth in 2023.

Green finance

2022: multi-pronged innovation and steady scale growth

2023: the status of offshore green financial market is more prominent

The Hong Kong Government attaches great importance to green and sustainable finance. In 2022, the Hong Kong SAR Government, financial regulators and the industry will continue to adopt a multi-pronged approach to promote the green and sustainable financial development of Hong Kong.

Innovation, March 23, Hong Kong Exchanges and Clearing ushered in the first carbon futures ETF-- gold carbon futures ETF listing. On May 16, the Hong Kong SAR Government issued the first batch of 20 billion Hong Kong dollars of green retail bonds. The Core Climate trading platform for the international carbon market of the Hong Kong Stock Exchange was launched on October 28th, where transactions can be denominated in Hong Kong dollars as well as in RMB.

In terms of scale, the size of the Hong Kong ESG Fund has increased steadily in 2022. According to the Hong Kong Financial Services and the Treasury Bureau ("Treasury Bureau"), as of September 30, there were 154 ESG funds approved by the SFC, an increase of 61% over the same period last year, including seven ETF, with total assets under management of US $124.1 billion (equivalent to about HK $967.9 billion). By the end of October this year, the SAR Government had approved nearly HK $150 million to more than 160 green and sustainable debt instruments issued in Hong Kong.

In terms of system building, the Hong Kong Securities and Futures Commission (SFC) issued the Green and Sustainable Financial agenda in August, making it clear that it will continue to improve the quality of information, increase transparency and build investor confidence in the future. support the green and sustainable financial development of Hong Kong and promote the further greening of the economy, and the SFC is also working with the HKEx To develop a climate reporting framework applicable to Hong Kong listed companies and designed to comply with the global benchmarking standards laid down by the International Council on Sustainability Standards (International Sustainability Standards Board).

Looking to the future, HKEx said that it would continue to actively expand the carbon trading ecosystem, including expanding products and services, improving trading mechanisms and infrastructure, and exploring the formulation of relevant standards applicable to Hong Kong and promoting the transformation of the region's low-carbon economy. We are committed to developing Hong Kong into a leading international carbon trading center.

Looking forward to 2023, Jia Jingwei, co-director of the international rating agency Fitch evergreen ESG research group, said that the labeled bond (ESG-labelled bond) market in the offshore market of Hong Kong in 2023 will continue to develop rapidly, driven by Chinese issuers, with a variety of issuers. The China-EU Joint Classification Catalog (EU-China Common Ground taxonomy) is expected to be improved in 2023, with more attention and recognition from market participants, which can gradually help Chinese issuers expand their financing channels in Hong Kong's offshore green bond market and gain more attention from international institutional investors for China's labeled bonds. With the increasing maturity of the national carbon market, the National Certified Voluntary Emission reduction Trading (CCER) is likely to be launched in 2023. Hong Kong, as an international financial center, participates in the trading of carbon financial products and will play an important role in creating a voluntary emission reduction system in the Greater Bay area carbon market.

Financial science and technology

2022: virtual assets Manifesto released

2023: financial technology reaches new heights

On October 31, Hong Kong formally issued the Policy Declaration on the Development of Virtual assets in Hong Kong (the Declaration). The Declaration states that the SFC will conduct a public consultation on the appropriate extent to which retail investors can buy and sell virtual assets under the new licensing system. The Hong Kong Government welcomes the introduction of virtual asset exchange traded funds (ETF) in Hong Kong. The Hong Kong Government and regulators are studying the following pilot schemes to test the technical benefits of virtual assets and to try to further apply the technology to the financial market. These pilot schemes include the issuance of non-homogeneous tokens (NFT), green bond tokenization and digital Hong Kong dollars for Hong Kong Financial Technology week 2022.

Hong Kong Exchanges and Clearing ushered in Asia's first encrypted assets ETF-- Southern East British bitcoin futures ETF and Southern East British Ethernet coin futures ETF.

Hong Kong regulators remain cautious about virtual assets. The Hong Kong Securities and Futures Commission (SFC) announced on December 13 that the provision of virtual asset "deposit", "savings", "income" or "pledge" services (virtual asset arrangement) to Hong Kong investors by the virtual asset platform continues to prevail. Therefore, investors are once again reminded of the risks associated with virtual asset arrangements, and take this opportunity to remind the industry when providing virtual asset arrangements to Hong Kong investors. Attention must be paid to potential legal provisions.

As to whether there is any need for improvement and further innovation in the supervision of virtual assets at the regulatory level of the Hong Kong government, Nanfang Dongying said that Hong Kong has clearly expressed its open attitude towards virtual assets and pragmatic development strategies in the Declaration. It is believed that the Hong Kong Government will, as mentioned in the Declaration, take into account the evolving nature and innovative models of virtual assets in the legal and regulatory system, so as to provide a convenient environment for the sustainable and responsible development of virtual assets. The Hong Kong Government has also made it clear in the declaration that, on the one hand, virtual asset innovation can flourish sustainably in Hong Kong, on the other hand, it is necessary to ensure that the actual and potential risks caused by financial stability, consumer protection, combating money laundering and terrorist financing can be mitigated and managed in accordance with international standards.

Mr Leung, head of Financial Technology at invest Hong Kong, said that recent events and market developments had shown that digital assets had a real and obvious impact on the real economy, and this development trend was inevitable. However, most of the discussion in the market tends to focus on the cryptocurrency market, which makes up only $1 trillion, such as Bitcoin and Ethernet coin. But in fact, the focus of the Hong Kong SAR Government is not this, but in the asset monetization market worth hundreds of trillions of dollars, how to monetize the huge traditional assets is the biggest development opportunity for the virtual asset industry in Hong Kong.

In addition, Hong Kong is one of the pilot cities for the Digital currency (CBDC) of the Central Bank of China, that is, the digital RMB. Apart from actively promoting the internationalization of the digital RMB, Hong Kong is also actively working with the people's Bank of China and the central banks of many countries to explore the cross-border application of legal tender. Between August 15 and September 23, 20 commercial banks from the Hong Kong Special Administrative region, Chinese mainland, the United Arab Emirates and Thailand, on behalf of their corporate customers, made payments, foreign exchange transactions (FX) and simultaneous settlement (PvP) transactions using the central bank digital currency issued by their respective central banks on the digital currency bridge platform. More than 160 payments and foreign exchange transactions were conducted, totaling over US $22 million. It is believed that in the new year, the digital currency bridge project will continue to make breakthroughs.

Professor Dong Sun, director of the Hong Kong Bureau of Innovation, Technology and Industry, said that breakthroughs in core technologies such as artificial intelligence and Web3 are important factors in promoting the development of financial technology in Hong Kong. Significant progress has been made in Hong Kong's two flagship innovation and technology institutions. A series of new measures will give impetus to the development of Chuangke, including the vigorous development of financial science and technology. Hong Kong is ready to scale new heights in financial technology innovation.