Hong Kong’s stock market has rounded off five bumper years by toppling Tokyo as the world’s third-largest exchange.
This month it emerged that the booming financial hub now surpasses Japan in terms of stock market capitalisation.
The New York Stock Exchange remains the world’s largest, followed by the US NASDAQ market, which is traditionally dominated by tech-oriented shares.
A unifying Chinese market
London vies with the pan-European Euronext exchange – which includes the markets of Paris, Amsterdam, Brussels, Lisbon and Dublin – for sixth place.
To be fair to Tokyo, Hong Kong has had a little help in growing to its present size. The Stock Connect programme links the territory’s exchange to those of Shanghai and Shenzen on the Chinese mainland, creating a two-way financial corridor through which Chinese and international investors can deal in securities in all three markets using the trading and clearing facilities in their home exchange.
Reflecting this unifying Chinese marketplace is the Hang Seng 50 China Index, which includes the top 50 Chinese companies in terms of market capitalisation quoted on any of these three exchanges. Currently trading at 9,071.89, the index has recovered well from a spell in the doldrums stretching from last summer to late January this year.
From there it dropped sharply to 5,574.10 on 10 February 2016 before beginning a slow ascent to a recent high of 10,111.82 on 29 January 2018.
Recently, the index has been cheered by signs that the slowdown in China’s housing market is reversing, with prices rising in more than 50 cities. Also bolstering sentiment are suggestions from Washington that the US-China trade talks are making progress.
Clean bill of economic health
The Hang Seng 50 contains big corporate names that have become synonymous with China’s emergence as an economic superpower. These include tech companies Foxconn, Tencent, China Telecom and China Mobile; financial services groups ICBC, Bank of China, China Life and CITIC Bank; consumer goods companies Kweichow Moutai, SAIC Motor and Gree; and energy companies China Shenhua and PetroChina.
A glowing report from the International Monetary Fund (IMF) in July last year will have further burnished the attractions of China for investors. It said: “The Chinese economy continues to perform strongly. GDP growth accelerated to 6.9% in 2017, driven by a cyclical rebound in global trade.
Hong Kong’s rise as a financial centre is of a piece with China’s entry into the world’s financial mainstream. Its currency, the renminbi, was allowed in 2016 to join the IMF’s elite basket of reserve currencies, alongside the dollar, the euro, sterling and the yen.
This basket underpins the IMF’s own internal “currency”, the Special Drawing Right, which is exchanged only between governments.
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