The Hong Kong stock exchange is part of a massive and rapidly growing financial centre. HK is the world's ninth largest international banking centre. In Asia, it is second only after Japan. For a location so small, this is an astounding achievement.
The Hong Kong stock exchange was expanded in 1999 to include the Growth Enterprise Market (GEM). The timing was unfortunate as the dot com crash of 2000 weakened it's impact.
The GEM was launched to assist smaller and high growth companies. It was hoped that this would also help to broaden the overall market.
The Hong Kong securities market has been increasingly internationalised. There has been a continued rise in the participation of international investors in the market and many of the initial public offerings through the stock exchange are have also been global fund raisings.
This
international and offshore reputation is also a feature of the fund
management sector. It was believed that in 2003 alone, funds under
management surged by a massive 80%.
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The European Savings Directive has had an obvious positive impact on
Hong Kong as funds flee European financial havens and into the Asian
territories (including Singapore). Between 1989 and 2004, the money
managed in Hong Kong has increased a massive 15 times according to the
SFC. In fact, the number of funds in Hong Kong has grown from 783 to
1,933 in that same period.
It might seem obvious to state, but an often overlooked fact - especially by legislators - is that a capital market relies on ... capital. As such, regulations in one territory or region that have a negative impact will almost certainly cause significant amounts of money to be moved to other safer, or more remunerative, parts of the world.
Of course, both safe and remunerative are temporary phenomenon. However, if laws are permanent, as they usually are, the loss of capital from a market is often permanent.
It is for this reason that despite the handover of HK from the UK to China - something that would appear to be bad for capital at first glance - the territory has managed to massively increase funds under management, trading activity and the size and scale of their financial services sector.
Rule changes enacted in 2002 also allowed hedge funds to operate in Hong Kong. This area has been growing steadily and there are now a number of such funds available to retail investors.
For more information about related topics, please see:
Hong Kong Stock Exchange
Hong Kong Stock Exchange History