Asian Financial Forum: HKEX's Aguzin underscores Hong Kong's 'superconnector' role, says China, rest of the world 'massively underinvested' in each other

Hong Kong's role as a "superconnector" between the capital markets of mainland China and the rest of the world will continue because of hugely untapped investment opportunities, Nicolas Aguzin, the CEO of bourse operator Hong Kong Exchanges and Clearing (HKEX), told the Asian Financial Forum (AFF) on Thursday.

"When we look at the total amount invested in China and Hong Kong relative to GDP [gross domestic product], the world is still massively underinvested in China," Aguzin said. That is also the case the other way around, he added.

"China represents close to 20 per cent of the global GDP, and the amount of investment today by international investors is like 2 per cent, 3 per cent. So that, at some point, has to shift."

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While China's economic growth has slowed, recording a 5.2 per cent increment last year, the opportunities in its US$18 trillion economy remain significant, Aguzin added.

Aguzin and the other speakers on the panel agreed that some investment flows were happening despite a difficult 2023, which saw high interest rates, heightened geopolitical tensions and an economic slowdown, around the world.

Southbound trading, or mainland investors buying and selling offshore debt through the Hong Kong exchange's Stock Connect mechanisms, is starting to drive material volume, said Matthew Ginsburg, the global co-head of investment banking at HSBC.

Ginsberg praised the introduction of dual-currency counters by HKEX. These counters, which were launched in June last year, initially allow 24 companies to offer their shares in Hong Kong dollars as well as the yuan to investors in the city. These firms include gauge heavyweights such as Alibaba Group Holding, Baidu and Tencent Holdings.

"At the end of the day, investors choose to come to markets where there is capital and where there are investors, and the more that Hong Kong represents access to Chinese capital, the more attractive it is going to be for issuers from Indonesia, from Thailand and the likes," he added.

Last year, HKEX included the stock exchanges of Saudi Arabia and Indonesia in a list of recognised bourses, to attract secondary and cross-border listings from companies based in the Middle East and Asean countries.

Mindful of headwinds such as inflation, geopolitical tensions and elections in several countries around the world, the speakers struck a cautiously optimistic note on the outlook for capital markets in 2024.

"We're hopeful that if you put together earnings, economic growth, more stability and support from the Chinese government, which is always critical, that 2024 will be a better year than we all think it might be," Ginsburg said.

The markets are finding themselves at a point where they are seeing some movement from equity markets into money market funds, and some movement outside China, because of geopolitics, Aguzin said.

"At some point these things will turn. We're probably getting closer to the bottom of a cycle," he added.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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