A HAVEN OF FREE TRADE SHOWS THE WAY TO CHINA’S OPENING MARKETS
HEAD OF PRODUCT, BARCLAYS STOCKBROKERS
THIS week takes us to Asia-Pacific; to Australia, Hong Kong and Singapore. All three offer investors access to China but none more so than Hong Kong.
FRAGRANT HARBOUR
Hong Kong is Asia’s second largest exchange by market capitalisation and was formed in 1980 by a merger between the Far East Exchange, Kam Ngan Stock Exchange and Kowloon Stock Exchange.
Now it is a leading global financial centre, characterised by a progressive approach to free trade and low taxes, which make it an attractive place for both institutions and individuals alike. Not only is Hong Kong considered the business capital of Asia, it is also seen as an economic barometer for the region.
Hong Kong’s business credentials go a long way; evidenced by both the individuals and companies which are choosing to relocate there. One example is Anthony Bolton, the renowned fund manager, who has recently moved to Hong Kong to manage the China Special Situations fund. Or even HSBC, returning home.
CHINA
For many investors, Hong Kong is a route into China. China is one of Hong Kong’s principal trading partners, in both goods and services, and there are over 3,000 Chinese businesses based in Hong Kong – plenty of food for choice. Hong Kong has long been considered the international trading outlet for China and since the 1997 handover has been increasingly positioned as the international financial centre for China.
Large Chinese companies such as the Bank of China (SEHK: 3988) and China Telecom (SEHK: 728) are listed on the Hong Kong Stock Exchange.
OPPORTUNITIES
Prada recently chose to float on the Hong Kong Stock Exchange, raising HK$16.7bn (£1.32bn) in institutional and retail investment. Not only was it the largest listing in Hong Kong so far this year, it is the largest ever consumer listing to take place on the exchange.
Despite the difficulties that this listing experienced in practice, due to both economic fallout from the Greek crisis and potential Italian tax liabilities (see article, left), Prada’s groundbreaking decision to opt for the Hong Kong Stock Exchange, rather than one in London or the US, could still be a wake up call for the more “traditional” exchanges – a reminder of the growing lure of the East’s fragrant harbour.