Tough days ahead for HK finance industry

April 12, 2016 16:30
Will the central government continue supporting Hong Kong as the first choice for overseas fundraising market? Photo: Bloomberg

Hong Kong’s economy is likely to encounter quite serious challenges in the coming two or three years.

A study released by the University of Hong Kong predicts the city’s economy will grow 1.5 percent this year.

But, I’m more pessimistic. I think the real GDP growth rate may be close to zero, or even fall below zero. The situation in the second half may even be worse.

Currently, Hong Kong’s economy has four pillars: trade and logistics, tourism, finance and professional services. Strictly speaking, there’s only one left: the finance industry.

I’m increasingly concerned about the outlook of the finance industry.

The mainland financial market is actively exploring a new “fourth board”, an equity exchange center, and a “fifth board”, a crowd funding platform.

On the other hand, Hong Kong’s financial market is doing nothing of that sort.

Without such fundraising platforms, which have a lower threshold, startups and the innovative industries will suffer over financing issues.

In an era that pursues innovation and technological advancement, all countries should rely on a “multi-layer” financial market and technologies to develop their economy.

If Hong Kong fails to support the financing demands of the new economy, its financial industry may deteriorate.

Because there will be less companies to list on the main board and more innovative small businesses eager for financing platform.

Can the main board be the only pillar for the city’s financial market? Will the central government continue supporting Hong Kong as the first choice for overseas fundraising market?

As for the asset management business, the mainland government has lifted restrictions on channels for citizens who want to invest overseas.

The era of easy money for Hong Kong financial institutions has ended. They need to incorporate advanced technologies like artificial intelligence, big data and fintech into their financial asset management practices.

I gave a speech in Macau’s monetary authority last Saturday about how fintech, big data and artificial intelligence can change the traditional way of making investments and managing assets.

In the United States, assets worth about US$50 billion are being managed with the assistance of artificial intelligence.

In Hong Kong, universities have accumulated quite a lot of fintech-related technologies.

Local financial institutions should cooperate with these universities to help establish Hong Kong’s position as a fintech center.

This article appeared in the Hong Kong Economic Journal on April 12.

Translation by Myssie You

[Chinese version 中文版]

-- Contact us at [email protected]


adjunct professor in the Department of Finance at HKUST Business School