Source: China Fund News
On March 26, the Milken Institute Global Investors' Symposium (Milken Institute Global Investors' Symposium) was held in Hong Kong, China. This is the first time that the Milken Institute, a well-known American economic think tank, has held an investment summit in Hong Kong, China.
At the seminar on March 26, Hong Kong's Financial Secretary, Chan Mao-po, said in his speech that after the pandemic, Hong Kong's economic fundamentals were good, but the asset market was at odds with economic fundamentals. The reason behind this is geopolitical and other reasons. Chen Maobo introduced the progress of the construction of Hong Kong's international financial center from six aspects. In a roundtable discussion on the theme “Precisely Adjusting China's Growth Engine”, Chen Jiaqi, CEO of Hong Kong Investment Management Co., Ltd., advised investors to make decisions based on facts and data, and abandon noise to obtain a reasonable understanding of the Chinese market. She said that while pursuing financial goals, Hong Kong investment management companies need to carry out strategic missions to enhance Hong Kong's long-term competitiveness.
According to information, the Milken Institute Global Investor Conference on March 26 attracted more than 500 business people from around the world with the theme of “Thriving Together, Connecting Global Markets (Thriving Together, Bridging Global Markets)”.
Chen Maobo: Hong Kong's asset market is at odds with economic fundamentals
Chen Maobo first introduced the current state of Hong Kong's economy.
He said that Hong Kong's economy has recovered from the pandemic. Hong Kong's gross domestic product (GDP) grew by 3.2% year on year in 2023. In 2023, there was a strong rebound in tourism to Hong Kong, and private sector consumption and overall investment also improved. High interest rates and geopolitics pose certain barriers to exports. In terms of price levels, the level of inflation in Hong Kong is still low. For the whole of 2023, Hong Kong's inflation level was around 1.7%. From November 2023 to January 2024, Hong Kong's seasonally adjusted unemployment rate was 2.9%.
Hong Kong has made significant progress in attracting talent and investment. First, since the launch of the plan to introduce key enterprise offices in December 2022, more than 50 companies have settled in Hong Kong. They will bring in more than $5 billion in investment and create 13,000 jobs. The Hong Kong Investment Promotion Department has also attracted more than 380 companies to Hong Kong. These companies will invest a total of 7 billion to 8 billion US dollars in Hong Kong.
Second, since the launch of various talent programs in December 2022, Hong Kong has received 160,000 applications, and more than 100,000 people have arrived in Hong Kong.
Third, capital from the Middle East is arriving in Hong Kong.
Chen Maobo said that despite the complicated external environment, Hong Kong is expected to achieve 2.5% to 3.5% GDP growth in 2024. The reason behind this is an improvement in exports, the continued resumption of inbound tourism, and the establishment of enterprises and talents in Hong Kong one after another.
Although Hong Kong's economic base is solid, the performance of the Hong Kong asset market has not been as good as expected. Last year, residential real estate prices in Hong Kong fell by an average of 7%, and stock market prices fell by an average of 14%. Both the residential real estate and stock markets are showing a sharp decline in volume and price. The reasons for the discrepancy between asset markets and economic fundamentals include a high interest rate environment, etc. Geopolitics and its impact on capital flows and investment sentiment are also important reasons. In the short term, Hong Kong's policy goal is to restore confidence, while its medium- to long-term strategy is to promote high-quality development.
Promoting the construction of an international financial center in six areas
Chen Maobo explained Hong Kong's progress in advancing the construction of an international financial center.
First, listing platforms. A task force was set up in Hong Kong last year to improve the liquidity of the stock market. The Hong Kong Government is currently implementing the relevant recommendations. For example, Hong Kong will improve its listing system by attracting more high-quality international issuers and new capital to Hong Kong. Hong Kong will improve trading mechanisms, reduce costs, improve investor service levels, and enhance market promotion.
Second, it is connected to the mainland market. Since the introduction of the stock interconnection mechanism 10 years ago, the interconnection mechanism between Hong Kong and the Mainland has continued to advance. Today, the interconnection mechanism covers bonds, ETFs, derivatives, etc. Hong Kong is the preferred platform for international investors to enter the mainland market. According to the data, mainland stocks held by overseas investors through stock interconnection account for more than 70% of the total market value of mainland stocks held by overseas investors.
With the support of relevant departments in the Mainland, the scope of stock connectivity has been expanded. Today, international companies can access stock interconnection. Up to now, there are 24 stocks in Hong Kong that can be traded in both HKD and RMB, and offshore RMB holders have more options to invest.
Third, asset and wealth management centers. By the end of 2022, the scale of asset management and wealth management in Hong Kong was close to US$4 trillion, with two-thirds of the capital coming from outside Hong Kong. In February 2024, the regulators of the two regions launched the “Guangdong-Hong Kong-Macao Greater Bay Area Cross-border Banking Connect 2.0 version”. Meanwhile, in order to attract more family offices, Hong Kong has introduced a series of policies and measures. At the beginning of March, Hong Kong launched a new capital investor entry scheme to attract wealthy families and entrepreneurs to Hong Kong.
Fourth, offshore RMB centers. China's imports and exports account for about 14% of global trade, yet RMB settlements account for only 4% of global trade. As a reserve currency, the RMB accounts for only 2% of the global currency. As economic ties between the mainland and other regions become closer, there is plenty of room for improvement in RMB demand. Hong Kong is committed to enhancing the liquidity of offshore RMB business and improving infrastructure and ecosystem, and offshore RMB construction will also provide huge development opportunities for Hong Kong.
Fifth, green and sustainable financing. In 2022, Hong Kong issued more than US$80 billion in green debt and bonds. Bonds issued in Hong Kong account for about one-third of Asia's total. By the end of 2023, there were about 220 ESG (Environmental, Social and Governance) funds in Hong Kong, and the number of funds increased by 24% year on year. The total asset management scale of these funds increased 20% year over year to HK$1.3 trillion.
Recently, Hong Kong issued a vision statement on developing a sustainability disclosure ecosystem, striving to be one of the first jurisdictions to align local sustainability disclosure standards with the sustainability disclosure standards of the International Commission on Sustainability Standards.
Finally, virtual or digital assets. Hong Kong is fully aware of the potential blockchain can play in financial innovation. It was one of the first jurisdictions to establish a complete virtual asset service provider licensing system, and is one of the cities in the world with proper investor and consumer protection systems for virtual assets. Hong Kong is also planning to introduce a stablecoin regulatory system.
Chen Jiaqi: Based on data and facts, abandoning noise
Chen Jiaqi, CEO of Hong Kong Investment Management Co., Ltd., said during a roundtable discussion on the theme “Fine-Tuning the China Growth Engine (Fine-Tuning the China Growth Engine)” that if you read the news, people will get a lot of negative information about China. However, when she visited the site, she observed a different picture. She started from three aspects. First, China is undergoing an economic transformation, moving from rapid growth to healthier and more sustainable growth. Second, although the Chinese economy is facing uncertainty, the government has not shied away from the problem. Instead, they are aware of the problem and are solving it. Third, she believes that the 2024 Annual Meeting of the China Development High-Level Forum held in Beijing recently conveyed the following message: the government supports market opening and private enterprises.
She added that pragmatic long-term investors should not take a “one-size-fits-all” approach risk. She distinguished between cyclical and structural risk. For example, interest rate differences between China and foreign countries drive cross-border capital flows, which is a cyclical issue. But beyond that, there are longer-term variables. For example, the “new quality of productivity,” which has recently been hotly debated. She said she will continue to monitor relevant policies. Chen Jiaqi further stated that in terms of policy, she will look not only at topics and guidelines, but also at paths and implementation. The timeline for reaching the goal, and the mechanisms and methods for reaching the goal, are critical to achieving the goal.
As part of China, Hong Kong is integral to narratives about China. Hong Kong is a strong, vibrant and open economy. It has advantages in terms of capital, talent, and data flow, which lays a good foundation for writing a new Chinese story.
The Hong Kong Investment Management Company has a dual mission
Chen Jiaqi said that Hong Kong investment management companies have dual goals. First, as an investment institution, it pursues financial returns. Second, the Hong Kong Investment Corporation aims far beyond financial returns; it also has a long-term strategic mission to enhance Hong Kong's long-term competitiveness.
She introduced the work of Hong Kong investment management companies from four aspects.
First, Hong Kong Investment Management Corporation is not a pure capital provider.
Second, we see ourselves as builders and supporters of Hong Kong's relevant ecosystem. For example, we will focus on Hong Kong's venture capital industry and focus on strategic areas where Hong Kong has an advantage, such as climate technology, fintech, advanced manufacturing, healthcare technology, etc.
Third, Hong Kong is a “super contact” between China and the world. Through exchanges with people from all walks of life, Chen Jiaqi said that they have reached a general consensus: China has many interesting opportunities. Even in an industry under pressure, investors can find undervalued opportunities with significant long-term growth potential. Specifically, she mentioned opportunities to focus on biomedicine, automobile manufacturing, power batteries, and chemical engineering.
Finally, she emphasized the importance of focusing on data and facts and leaving out the noise.
Chen Jiaqi mentioned that in November 2023, Modena of the United States, one of the world's leading pharmaceutical companies, began construction of the first pharmaceutical company in China, Medner's R&D and production headquarters project in China. Furthermore, the Volkswagen Group has set up the largest R&D center in China other than its German headquarters to focus on the research and development of intelligent connected vehicles. Furthermore, Siemens has set up an industrial software R&D center in Shenzhen. These facts suggest that global institutions are choosing China based on business decisions. She thinks people should pay more attention to these facts.
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