Stock market performance in Hong Kong: an exploratory review

Abstract

This paper reviews the origin and development of the stock market in Hong Kong. The first formal stock exchange, the Association of Stockbrokers in Hong Kong, was formed in 1891. However, the activities of the stock exchange are generally regarded as insignificant until the 1970s. Since the 1980s, there have been a number of major reforms and some significant developments. These include the unification of four stock exchanges; the establishment of the Securities and Futures Commission; the closer economic relations with Mainland China; the merger of the Hong Kong Stock Exchange and the Hong Kong Futures Exchange to form the Hong Kong Exchanges and Clearing Limited (HKEx); the launch of the second board (Growth Enterprise Market); and the demutualisation of the HKEx. The Exchange generally responded positively to these reforms and developments. As a result, the Hong Kong stock market experienced significant growth in terms of its market capitalisation ratio, turnover ratio, and the total value traded ratio. Despite the impressive growth in various stock market indicators, however, the Hong Kong stock market still faces some challenges, including regulatory challenges, as well as some concern over its future viability as a global equity hub.

Determinants of economic growth in Hong Kong: The role of stock market development

“…The rapid expansion of the Hong Kong stock market may be tied to the financial liberalization of Mainland China since the early 1990s. During the financial liberalization process of the early 1990s, the Hong Kong Stock Exchange performed a unique role of listing red chips, H-shares, and initial public offerings of Chinese state-owned banks (see Ho & Odhiambo, 2015), which was essential for its drastic expansion. Therefore, to further enlarge the scale and depth of Hong Kong stock market, it may be a good initiative for the stock markets in Hong Kong and the ones in Mainland China to continue to integrate.…”

“…It remained to have the highest ranking in the world during the period 1999 to 2015 [see World Development Indicators (WDI), 2017]. The impressive growth in market capitalization is mainly due to the increasing listing of Mainland enterprises in Hong Kong since 1990s, and the continuous expansion of Hong Kong companies into overseas markets (see Ho & Odhiambo, 2015;Lee & Poon, 2005). In addition to the size of the stock market, the liquidity of the stock market also improved during this period.…”

The macroeconomic drivers of stock market development: evidence from Hong Kong

“…Since the late 1980s, a number of reforms have been introduced to strengthen the stock market in Hong Kong (see Ho & Odhiambo, 2015). One of the major reforms was the unification in 1986 of the four stock exchanges to form the Hong Kong Stock Exchange, a reform designed to prevent Under the ordinance, the SFC became the sole statutory securities market regulator regulating the securities and futures markets in Hong Kong (Arner et al, 2010).…”

“…The major reason for the phenomenal growth in market capitalisation is that Hong Kong has established itself internationally as a preferred centre for initial public offerings (IPOs). In particular, the growth of Hong Kong as an IPO centre has been largely driven by the listing of Mainland Chinese companies (Ho & Odhiambo, 2015). When the stock market development is gauged in terms of the market capitalisation ratio, such development becomes even more impressive.…”

Hong Kong and Shanghai: a tale of two cities in China

“…Moreover, Hong Kong still has a much bigger economic base than Shanghai. In 2014, for example, Shanghai's gdp per capita, foreign direct investment (fdi) and total trade (exports plus imports) were only 38%, 17% and 21% of Hong Kong's, respectively (Ho and Odhiambo, 2015). So, a catching-up in the near future is not very probable.…”