Hong Kong Exchanges and Clearing was listed and traded in Hong Kong Exchanges and Clearing on June 27th. Based on the listing price of the former reinstatement right, HKEx has increased 163 times over the past 20 years, with an average annual compound return of 29%.

In the long run, the stock of the HKEx has been able to provide such a high return on investment because it has always maintained the attribute of high growth; however, Hong Kong's economic volume, population growth and market depth are all very small. It is not enough to support the long-term growth of the HKEx.

As a matter of fact, the high growth of the HKEx stems from many transformations in its history, each of which accurately captured the most cutting-edge pulse of global economic development at that time and never lagged behind. make it leap from a second-rate regional exchange in Asia to the world's largest issuing and fund-raising center, and then develop into a wealth management center.

Throughout the history of Hong Kong stocks, there have been five major turning points, providing five major opportunities for the HKEx. This article takes you to review these five historic moments, review the course of the development of the HKEx, and sum up the gains and losses as the 20th anniversary of the listing of the HKEx.

Preface: a preliminary understanding of the Stock crash (1973)

On March 9, 1973, Hong Kong's Hang Seng Index hit a new high of 1744.96 since the establishment of the stock market. Since the Hang Seng Index bottomed out in January 1972 (323), the market has risen 5.5 times in the past year or so.

From 1972 to 1973, the five tigers of Chinese real estate at that time-Cheung Kong, Sun Hung Kai Properties, Hang Lung Properties, Hopewell and Dachang Real Estate-were all listed, which became the biggest IPO tide in the history of Hong Kong stocks at that time.

In October 1972, the dairy company encountered a hostile takeover by the British real estate tycoon "Land Company". Land was proposed to be acquired through a "two-for-one" hostile takeover, and the major shareholders of the dairy company defended the stock price by increasing their holdings.

The market reached the top, IPO huddled, huge amount of financing, giant non-hegemonic mergers and acquisitions. This is an unprecedented madness.

As the listed companies were scarce resources at that time, they had to bribe the exchange as long as they wanted to go public. Coupled with the imperfect supervision, many fraudulent companies who want to list and get rich overnight will run away after circling the money through fake financial data.

The unlimited game of capitalists has been transformed into a movement of "creating wealth in the stock market" among the people.

Ignorant and fearless people rushed into the stock market crazily, as if it was too late, they would miss the opportunity for financial freedom. In order to cool the stock market, the exchange used fire hydrants to shoot at the crowd, which did not work. Finally, on March 9, 1973, the Hang Seng Index closed at 1774.96 points, the culmination of the crazy bull market.

Over the next two months, the Hang Seng index lost 2/3 of its value, hitting a low of 656.03 on May 9th. After a slight rebound, it continued to fall. The long bear market lasted for one year and nine months, and it was not until December 10, 1974 (150 points) that it finally bottomed out, with a cumulative decline of more than 90%.

When talking about the history of Hong Kong stocks and the HKEx, we have to mention the stock market crash in 1973, not only because it was the first stock crash in the history of Hong Kong stocks, but also during the British colonial period in Hong Kong. under the premise that there are no restrictions on capital and no protection for small and medium-sized investors, a naked war of wealth plunder.

The causes of the 1973 stock market crash and the problems exposed by the stock market crash are the barbaric core of Hong Kong's financial market and the starting point of all subsequent reforms.

1. Merger of the four institutions (1986)

At 10:00 on April 2, 1986, Bremridge, then Hong Kong's financial secretary, placed an order on the HKEx's electronic trading system and bought 100 shares of Swire.

This indicative transaction is the first transaction of the Hong Kong United Trading Company Limited (SEHK), which has just completed the merger of the four companies.

On that day, the Hang Seng Index closed at 1603.27 points, with 33 million shares traded on the market, with a turnover of 226 million Hong Kong dollars.

From this day on, the Hong Kong stock market put an end to the situation of "four dragons controlling water", and the Stock Exchange became the only legal stock exchange in Hong Kong. The first chairman of the newly established HKEx was Li Fuzhao.

Li Fuzhao, a native of Guangdong, was born in Hong Kong in 1929 and is the eldest son of Li Peicai, an early Hong Kong banking family. Under the influence of the family environment that has been a businessman for generations, Li Fuzhao joined the securities industry early after graduating from the United States.

At that time, the securities industry in Hong Kong was completely monopolized by the British. Chinese businessmen, as a rising power at that time, had to bribe the board of directors of the stock exchange in order to seek listing and financing.

In 1969, Li Fuzhao decided to open a Chinese stock exchange by virtue of his talent and contacts. This was later the far East Exchange (commonly known as the "far East Society").

Subsequently, in 1971, the Gold and Silver Stock Exchange was established, commonly known as the "Gold and Silver Club", and in 1972, the Kowloon Stock Exchange was established, commonly known as the "Kowloon Society". And the earliest establishment of the Hong Kong Stock Exchange (Hong Kong Association) to form a "four side by side" pattern.

The situation of "four exchanges standing side by side" has caused great trouble to Hong Kong's financial industry, resulting in a large number of regulatory vacuum areas, and the risks and hidden dangers are getting bigger and bigger.

Although the Chinese at that time knew that merger was the trend of the times, there were great differences within the British-dominated Hong Kong Society, which formed two factions that advocated merger and opposed it. The differences within the "Hong Kong Club" eventually led to the collapse of the merger plan of the "Hong Kong Club" and the "far Eastern Society" in 1977.

But this is an episode after all. Since the establishment of the Federation of Hong Kong Stock exchanges (HK Federation of Stock Exchange) in 1974, discussions and negotiations between the four exchanges on future development have become more and more frequent.

Finally, in 1986, the plan for the merger of the four exchanges was finalized; the four exchanges were scheduled to stop trading after the close of trading on March 27, and began trading on the newly established Stock Exchange on April 2. Li Fuzhao, who made the greatest contribution to the merger of the four firms, naturally became the first chairman of the newly formed Stock Exchange.

On March 27th, 1986, the Hang Seng Index closed at 1625.94 points.

After becoming chairman of the Stock Exchange, Li Fuzhao's fate has taken a dramatic turn for the worse. Although the "far East Exchange" was set up as early as 1969 because it was disliked that the British monopolized listed resources and accepted bribes, after the establishment of the Stock Exchange, Li Fuzhao was arrested by the Independent Commission against Corruption in 1988 on suspicion of bribery and sentenced to four years' imprisonment.

This seems to be a big joke played by fate and Li Fuzhao.

After all, securities is a high-risk industry, too close to money, too close to human nature, opportunities every day, temptations are everywhere: how to control themselves, it is not easy.

After his release from prison, Li Fuzhao lived in seclusion in Thailand and became low-key and restrained. In front of outsiders, he often mocked himself with Su Dongpo's poems: "everyone's adopted son wants to be smart, and I have been wise all my life." I only wish my son to remain in peace, and there will be no disaster or disaster. "

The merger of the four companies is destined to be an important stroke in the contemporary history of Hong Kong stocks and the HKEx. On the other hand, Li Fuzhao's contribution to the contemporary HKEx is tantamount to the founder in the practical sense.

After Li Fuzhao turned and disappeared, the history and fate of the HKEx were handed over to the next helmsman.

2. Li Yeguang's Book (1993)

On July 15, 1993, the trading floor of the Hong Kong Stock Exchange was crowded and jubilant. What is different from the past is that on this day, every guest is holding a bunch of beer-Tsing Tao Beer.

Tsing Tao Beer, who was listed on the Hong Kong Stock Exchange on that day, was the first mainland company to list and raise funds in Hong Kong in the form of H shares. The successful listing of Tsingtao Beer H shares has opened a new page in the history of the Hong Kong stock market. It was Li Yeguang, then chairman of the HKEx, who put forward the concept of "H shares".

In the 1990s, the rising Chinese enterprises had a growing demand for capital, but at this time the accumulation of wealth in mainland China was not enough to provide sufficient funds for the development of enterprises. Therefore, the introduction of foreign capital has become a very important goal.

Lee Yeguang, then chairman of the HKEx, was well aware of Hong Kong's advantages as an international financial centre and the demand for capital by mainland companies, and quickly realized the huge effects of the combination of the two.

Therefore, in 1992, Lee Yeguang sent a "letter" to the then Premier of the State Council, Mr Zhu Rongji, stating the idea of listing mainland state-owned enterprises in Hong Kong. The history of this incident is called "Li Yeguang Shu Shu".

Before Li Yeguang, most of the listed companies in the Hong Kong stock market were Hong Kong local enterprises and British-funded enterprises, such as CK Hutchison, Swire Swire, Land purchase, HK Electric Investments and HK Electric Investments, CLP, Towngas and so on. On the other hand, most of the state-owned enterprises that want to raise funds in the Hong Kong market are listed through backdoor listings or red-chip structures listed through subsidiaries.

For example, in 1986, China Merchants and Zhaoya International formed New ideas Company to inject capital into Union Bank (now ICBC Asia); in 1990, Citic bought shares in Pacific Pacific and injected capital into Cathay Pacific Airways, Dragonair, and so on, forming the present Citic Pacific; and in 1992, Haihong, a subsidiary of China Merchants, was listed in Hong Kong, becoming the first red chip. (within months of its listing, Haihong's share price soared from HK $2.80 to HK $15, reflecting the demand for high-quality state-owned assets. )

After Lee Yeguang submitted the letter, state-owned enterprises can be listed directly on the Hong Kong stock market. Since then, the Hong Kong market has ushered in an era of "H shares".

According to the data disclosed by the Hong Kong Stock Exchange, since 1993, the number and amount of funds raised by mainland enterprises have increased rapidly, whether in the form of red chips or H shares. By the end of 2019, the total amount of capital raised by mainland enterprises listed in the form of H-shares and red chips exceeded HK $4.7 trillion.

At the peak of the listing of state-owned enterprises in Hong Kong from 2007 to 2008, H-share + red-chip enterprises once dominated the Hong Kong stock market, and their market capitalization accounted for more than 80% of the Hong Kong market in 2008!

The listing of state-owned enterprises in Hong Kong has made a deep impression on the former Hong Kong stock market, profoundly changed the Hong Kong stock market, and helped Hong Kong to become the world's largest IPO market for many years.

The impact of that wave of H-share listings continues to this day. Of the 10 companies with the highest amount of capital raised in Hong Kong so far, with the exception of AIA Group Limited and Budweiser Brewing Company APAC Limited, the other eight are Chinese enterprises, and with the exception of BABA and China Unicom, all of them are H-shares of state-owned enterprises.

Lee Yeguang's letter and the listing of state-owned enterprises in Hong Kong have injected "mainland genes" and "reform genes" into the Hong Kong stock market, which is one of the most important reforms in the history of the HKEx.

After Li Yeguang retired in 2006, after a brief adjustment during the Ronald Arculli period, the HKEx welcomed her next reformer, Li Xiaojia, the framework laid down by Li Yeguang.

3. Interconnection (2014)

On November 17, 2014, the Hong Kong Stock Exchange Hall was jubilant. As one of the institutional arrangements for "connectivity" between the Hong Kong market and the mainland stock market, the "Shanghai-Hong Kong Stock Connect" officially landed. Two years later, on December 8, 2016, the Shenzhen-Hong Kong Stock Connect was opened. At this point, the infrastructure of interconnection has been completed.

However, as the basic institutional arrangement connecting the financial markets of the mainland and Hong Kong, the Shanghai-Hong Kong Stock Connect was neither applauded nor popular when it was first launched. On the first day of the opening of the Shanghai-Hong Kong Stock Connect on November 17, 2014, the Hang Seng Index fell instead of rising to close at 23797.08 points, down 1.21%. Northbound funds were used up at 01:55 in the afternoon, but southbound funds were sold coldly, using only 17% of the total.

On the second day, November 18, 2014, the Hang Seng Index continued to fall, down 1.13% for the whole day, while the interconnection transaction continued to cool, with only 37% and 7.6% of the quota for northbound and southbound respectively.

Over the next two days, the Hang Seng Index continued to fall, falling 0.66 per cent and 0.10 per cent respectively. The transaction of interconnection is close to the freezing point.

One week after its opening, it encountered a cold spell, but Mr. Li Xiaojia, then the CEO of the HKEx, was quite optimistic about this. He said: we are in charge of building the bridge. When the bridge is built, we are not afraid that no one will leave.

Mr Li Xiaojia's positive attitude towards connectivity is not a slap on the head, but is based on his view of the new pattern of relations between Hong Kong and the mainland.

With China's economic growth and the accumulation of residents' wealth, as well as the rapid development of Shanghai and Shenzhen as domestic financial centers in the mainland, Hong Kong's position as a springboard for international capital to enter China and a platform for Chinese enterprises to raise funds overseas has gradually weakened; on the contrary, the significance of Hong Kong as a quality target and product for Chinese residents to access overseas capital markets is becoming more and more prominent. It is no accident that businesses such as overseas property allocation and US dollar insurance policies have sprung up in Hong Kong.

At this time, the significance of Hong Kong is not only to allow outside money to flow into China, but also to help Chinese money participate in the investment of high-quality overseas assets in an orderly manner.

In the years that followed, Li Xiaojia's vision became more and more confirmed. Since 2015, as the market warms up, the Shanghai-Hong Kong Stock Connect has ushered in the first wave of mainland funds for the Hong Kong stock market.

On April 8, 2015, the Hang Seng Index rose 961 points, closing up 3.8%. The daily usage limit of 10.5 billion of the Hong Kong Stock Exchange was exhausted at 02:09 on that day. The big bull market has since exploded; however, as a flash in the pan, it comes and goes quickly.

But in the following years, northward and southward funds began to bring some long-term, far-reaching and beneficial changes to the A-share and Hong Kong stock market structure.

In 2017, the "buying" of southward funds created an unprecedented bull market for Hong Kong stocks. This year, many stocks hit record highs driven by southward funds, and their share prices rose many times.

In 2018 and 2019, as more and more global stock indices included A-shares in the scope of stock selection, leading to a large number of passive funds (ETF) to increase their holdings of A-shares through land equity. So far, foreign investment has become an indispensable part of the ecology of A-share investors.

In 2019, the average daily turnover of northbound funds exceeded 40 billion yuan and southbound funds exceeded 10 billion Hong Kong dollars. The connectivity and interaction between A shares and Hong Kong stocks are already very important.

4. "different rights of the same share" (2018)

On July 12, 2018, golden gongs were placed at the bottom of the screen in the newly renovated hall of the listing ceremony of the Hong Kong Stock Exchange. This is already the limit that the listing ceremony hall can hold.

Even so, the eight executives of the eight companies listed on this day still had to "share" a gong-the listing was too hot and there were not enough gongs.

These eight companies (fingertip moving, Yingheng Technology, Hongyang Real Estate, Qiyi Technology, Yingke Mutual Entertainment, Tianli Education, Renhe Technology, Hengwei Group) are not very famous, but the eight companies went public on the same day, which shows that the Hong Kong stock IPO market is extremely hot this year.

All this is due to the New deal, which revised the listing rules in April 2018.

What has long been criticized about Hong Kong stocks is that there are too many financial and real estate companies and few new economy companies; in particular, they are not allowed to list technology start-ups with different rights, making Hong Kong stocks miss a decade of technology and Internet prosperity.

Li Xiaojia, the head of HKEx, expressed regret over this, especially when HKEx missed out with BABA IPO in 2014. 'losing a company may not be a big deal for HKEx, but it would be a big loss if you miss a whole generation of tech innovative companies and new economy companies,'he said.

In April 2018, the HKEx introduced new listing rules, which accept the listing of companies with "different rights in the same share" and companies with "no history of profit"; companies with "different rights in the same share" add the letter W (weighted) after the stock symbol, while biomedical companies add B (biological) after the code name. These two new policies will remove the arrogant and rigid rules left over from the British Hong Kong era.

Subsequently, a large number of different rights of the same shares and biomedical companies, such as crucian carp across the river, have landed in Hong Kong stocks.

Although the market fluctuates greatly in 2018, and many companies break after listing, it is undeniable that as long as the company is attracted to list, it is tantamount to adding a good target to the market; if it is a potential company, it won't take long to get out.

Today, companies such as Meituan and Haidilao International Holding have developed into bull stocks in pursuit of funds.

5. Return of US-listed stocks (2020)

In June this year, people suddenly realized that the new listing rules launched in April 2018 had left a huge egg for the HKEx-the return of Chinese stocks.

Back then, in June 2000, the HKEx landed on the Hong Kong stock market as a listed company, code 388, at the peak of the .com bubble. However, due to restrictions on the listing rules of Hong Kong stocks, a large number of Chinese technology companies that have risen since then have to list in the United States.

Since 2000, there have been very few technology companies in the Hong Kong market, and until 2018, there were still a few that could be counted by fingers, including Tencent, ZTE, Sunny Optical, AAC Technologies Holdings Inc. and PCCW. I'm afraid only Tencent is involved in the Internet.

Li Xiaojia is right. Hong Kong stocks have missed a whole generation of technology companies in the past 20 years.

Yet history is so unpredictable.

In 2020, with the heated friction between China and the United States, many Chinese stocks began to consider returning to Hong Kong stocks or even A-share companies to be listed on the geopolitical board as a way to resist geopolitical risks. There is a spectacle: Chinese technology companies that were unable to list in Hong Kong because of different rules for the same shares and then listed in the US are now lining up to "go home".

In June this year, on the occasion of the 20th anniversary of the listing of the HKEx, two giants, NetEase, Inc and JD.com, have already landed on the HKEx. Chinese stocks rumored to be ready to return to Hong Kong for listing or secondary listing include Baidu, Inc., Trip.com, Pinduoduo and so on. If this wave of technology companies comes back, then HKEx is expected to become a real Chinese version of NASDAQ.

The 20-year technological dream of "losing" Hong Kong stocks has finally come to fruition.

On June 24, HKEx shares hit an all-time high of HK $321.8. Since the outbreak in March this year, HKEx has risen nearly 60%. In particular, since June this year, with the strengthening of the expectation of the "return of Chinese stocks", the share price of the HKEx has obviously broken through. The growth space of the HKEx has been opened again.

The end.

Throughout the history of Hong Kong stocks and the HKEx, it can be divided into five stages.

The first stage (before 1973): most of the listed companies were British or local consortium families, and the stock market at that time was a naked tool for capitalists to harvest medium and small investors. With the stock market crash in 1973 and the establishment of the Independent Commission against Corruption (ICAC), MacLehose carried out the New deal and became history.

The second stage (1973-1993): during this period, Hong Kong stocks became a financing platform for rising local enterprises (five tigers of Chinese businessmen, four real estate families, etc.). A series of classic capital acquisition wars in the history of Hong Kong stocks were completed during this period. For example, Li Ka-shing Bao Yugang jointly acquired Wharf, four major Chinese investors jointly acquired land, Cheung Kong Real Estate acquired Hutchison Whampoa, and so on.

The third stage (1993-2014): during this period, Hong Kong stocks mainly provided financing platforms for mainland Chinese enterprises (especially state-owned enterprises), meeting the rigid needs of Chinese enterprises for overseas fund-raising. H shares and red chips account for an increasing proportion in the market.

The fourth stage (2014-2018): during this period, with the landing of interconnection, Hong Kong stocks have become one of the important options for mainland investors and financial institutions to allocate overseas assets, meeting the rigid demand for global allocation of mainland funds. This stage is still going on.

The fifth stage (from 2018 to now): during this period, with the implementation of the new listing rules as the demarcation mark, more and more technology companies, bio-pharmaceutical companies and new economy companies began to list in Hong Kong; especially with the return of Ali, NetEase, Inc and JD.com to Hong Kong, Hong Kong stocks began to become one of the footholds for the return of Chinese stocks to the Chinese market.

With the interpretation of this trend, there will be more and more high-quality assets in the Hong Kong stock market, and the ability to provide global allocation of mainland capital will become stronger and stronger. To transform Hong Kong from an issuance and fund-raising financial centre to an investment and wealth allocation financial centre: this will be a historic opportunity for Hong Kong in the next 20 years.

Throughout the history of Hong Kong, the fate of the city has always been closely related to the national fortune of the Chinese mainland.

Throughout the history of the HKEx, whenever there is a major turning point in the fate of Hong Kong, the HKEx accurately sets the pulse of the times and leads the transformation of Hong Kong's financial industry.

The thread and logic of history are clear. From the merger of the four institutions to Li Yeguang's letter, from interconnection to different rights of the same shares, the pace of reform of the HKEx has never stopped. The reform gene of the HKEx, has been driving this exchange, as well as this financial city, to a higher dimension.

In my opinion, the reason why HKEx has been able to seize the opportunity of each transformation is nothing more than seizing the key position of Hong Kong in the pattern of global geographical and economic cooperation. and the uniqueness of the HKEx which is different from the mainland's two major exchanges (Shanghai Stock Exchange and Shenzhen Stock Exchange). To sum up, it is nothing more than one word:

Connect.

In the video release of the 2019 results, Mr. Li Xiaojia, the outgoing CEO of the HKEx, outlines the concept of managing the HKEx and the overall thinking for future development, which is also the word: Connect.

The merger of the four companies is the connection of internal securities trading in Hong Kong, the listing of H shares is to connect mainland state-owned enterprises with overseas funds, and the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect are to connect the exchange resources between the mainland and Hong Kong. on the other hand, strategies such as the new policy of "different rights of the same share" and the return of Chinese-listed stocks are to connect high-quality enterprises and entrepreneurs who are at the forefront of technology and business in the world to the platform of Hong Kong stocks. And then connect with the mainland funds.

At present, the tide of the times has pushed the HKEx to the top of the tide. Recently, some disharmonious factors in local and big-power relations have made many people worry about the future of Hong Kong.

At this time, it is the 20th anniversary of the listing of the HKEx. In my opinion, looking back at the 100-year history of the HKEx and the 20-year history of listing, if any experience can be summed up, I think there is only one experience:

No matter how volatile the international environment is, as long as we firmly rely on the Chinese mainland and revolve around the core concept of "connectivity", the position of both the HKEx and Hong Kong's financial market will not only be damaged, but may be strengthened on the contrary.