A view of Hong Kong Photo: VCG

The proposed national security legislation in Hong Kong intending to appease local social unrest is by no means a move to erode the city's competitiveness in the financial arena, local industry insiders said on Sunday.

"All Chinese mainland-invested financial institutions and overseas firms that rely on the mainland market have welcomed the new legislation, which bodes well for us in that it is capable of appeasing Hong Kong's social unrest and would be to the advantage of local financial businesses," according to an industry insider at the Hong Kong branch of a state-owned financial institution, speaking on condition of anonymity.

National security laws are common across the globe and not directly linked to the financial sector. It is merely a means of social governance targeting those employed by intelligence agencies, among others, the insider told the Global Times, adding that on the part of financial institutions truly committing to the local market, there is nothing to fear and they will not opt to flee.

The proposed legislation in Hong Kong will not affect the legitimate rights of foreign investors in the city, Chinese State Councilor and Foreign Minister Wang Yi said on Sunday in a press briefing at the ongoing two sessions, noting that the new legislation would be propitious to maintain the city's role as a financial, trade and shipping hub. 

The decision made by the National People's Congress (NPC) is targeted at a narrow category of acts that seriously jeopardise national security. It will not affect Hong Kong's high levels of autonomy, the rights and freedoms of local residents, and foreign investors' legitimate rights in Hong Kong, Wang said on the sidelines of the annual session of China's top legislative body. 

There should be more confidence, instead of excessive worries, about the city's future, the top diplomat commented.

As the banking industry veteran put it, foreign investment will not withdraw from Hong Kong when factoring in the city's irreplaceable financial status, that is its position as a bridgehead enabling access to the huge mainland market, its internationally acclaimed legal system and the city's role as a cross-border hub allowing for overseas capital flows into the mainland.   

In a post on his official blog on Sunday, Hong Kong Financial Secretary Paul Chan Mo-po wrote that some people may worry about whether the deliberation of the new law would impact foreign investor confidence in Hong Kong and the city's role as an international financial hub. 

However, there should not be baseless contemplations over such issues, which must be addressed based on the city's surrounding environment at large, he wrote. He asked if Hong Kong were to become a breach in national security, how could the city ensure it would not be taken advantage of as a tool to attack the country, or even become an unconventional battlefield. 

Hong Kong, an international financial center, serves as a bridge between the mainland and the international market, read the post, stressing that social security and political stability are indispensable prerequisites for international financial centers. National security laws and regulations are in place in other global financial hubs without affecting their development momentum.

A Reuters report on Friday apparently inflated worries about the proposed legislation, claiming that the new law could lead to capital and talent flight from the city. 

"I haven't observed any net outflows [of capital and talent]," said Ding Meng, an economist at Bank of China (Hong Kong).

The local market would maintain its long-term competitiveness, he believes.  

Hong Kong Exchanges and Clearing Limited declined to comment. The Hong Kong Monetary Authority has yet to respond to a request for comment.

Headwinds facing the local stock market might continue, but it is hardly the case that Hong Kong's financial outlook would suffer, observers reckoned. 

The market will be under pressure for now, and the worst-case scenario might be that the Hang Seng index would fall below 20,000 points, but that is unlikely, Hong Hao, managing director and head of Research at BOCOM International, told the Global Times on Sunday.

The benchmark index sank 5.56 percent, or 1,349.89 points, to 22,930.14 points, on Friday, its biggest one-day slide since July 2015.

"Those who are leaving are the ones you don't want to keep. So if they are leaving, farewell to them," Hong said. "And there will be new money coming in. And I believe it's a matter of time and it will compensate for near-term outflows."