For about a year now when the protests in Hong Kong reached its climax and started to turn violent it seems to have become rather fashionable to write off Hong Kong. Countless articles question the City’s autonomy and the implications as a global financial and trading centre. The recent move by the US in response to the implementation of the National Security Law to revoke Hong Kong’s preferential trade status and to impose OFAC sanctions on Carrie Lam and a few others fuelled this click-bait like headlining.

Beyond the sensationalism, there are important reasons to believe Hong Kong will endure. Hong Kong dominates the IPO market outside the US. No other exchange outside the US completed more IPOs or raised more capital via public offerings than the Hong Kong Stock Exchange in the first half of 2020. In 2019 HKEX attracted 161 IPOs and first-time listings and USD40.28 billion in market capitalisation. HKEX’s total market capitalisation of HKD42.7 trillion (USD5.5trillion) is more than six times that of regional rival Singapore. Hong Kong is China’s most important offshore fundraising location. Chinese companies raised over USD350 billion in IPO’s in Hong Kong since 1997. This is about the same amount that Chinese companies have raised in all other major exchanges combined.

Hong Kong is the centre of the hedge fund industry in Asia, with more assets under management than Singapore, Japan and Australia combined. The idea of investment managers relocating to high-tax Japan or Australia seems unlikely. In a bid to attract more private equity funds onshore, Hong Kong is introducing a new Limited Partnership Fund regime which we discuss in our article section. This comes after the implementation of the Open-ended Fund Company regime back in 2018. Singapore has successfully launched the Variable Capital Company (VCC) scheme earlier.

Hong Kong originates and intermediates almost two-thirds of China’s inward foreign direct investment and outward direct investment as well as most financial investments. Over 70% of the international trade volume in RMB is settled through Hong Kong.

In absence of any real competitor in the region, the decision to steer clear of Hong Kong appears to be only an individual company consideration rather than taken broadly across industries. With our offices in Hong Kong and Singapore, we can assist in both jurisdictions.