Cheah Cheng Hye

Opinion | Hong Kong stock market’s best bet is more access to mainland savings

There is no alternative of comparable potential for Hong Kong than the mainland and its deep pool of household savings

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Women walk past a screen showing the Hang Seng Index in Central, Hong Kong, on October 8. The index has declined 16 per cent in the past 10 years while the S&P 500 index has increased almost 190 per cent during the same period. Photo: Eugene Lee

Cheah Cheng Hye

Published: 4:30pm, 1 Dec 2024Updated: 5:24pm, 1 Dec 2024

Hong Kong is a key beneficiary of mainland China’s high household savings rate. A spillover of capital into Hong Kong from the mainland’s overflowing reservoir of household savings could provide much-needed relief for Hong Kong, which is struggling with protracted economic and geopolitical uncertainties.

While the mainland is subjected to capital controls, Hong Kong is treated as a special case, with Beijing gradually easing restrictions to allow money to flow under various schemes.

At the Global Financial Leaders Summit held in Hong Kong in November, Vice-Premier He Lifeng, the nation’s top economic official, said: “To accelerate the development of our country into a financial powerhouse requires Hong Kong to become an even stronger international financial centre.”

The reality is that Hong Kong’s stock market has been held back by insufficient investment demand for years. This is evident in several ways, such as how most initial public offerings (IPOs) in Hong Kong don’t perform. In the past five years, 473 companies were listed and of these 81 per cent still trade below their IPO price.

Second, trading volume is lacklustre. So far this year, the market’s average daily turnover is HK$128 billion (US$16.4 billion), which is below levels seen in 2020 and 2021. For comparison, the combined daily turnover of the mainland’s Shanghai and Shenzhen exchanges is about five times larger than Hong Kong.

Third, Hong Kong share prices have been weak, with the Hang Seng Index declining 16 per cent in the past 10 years. During the same period, the S&P 500 index increased almost 190 per cent.