HKEX December 5, 2022 Photo: cnsphoto

Hong Kong Exchanges and Clearing Limited (HKEX), the operator of Hong Kong’s stock exchange, announced Tuesday the opening of its New York office, as the exchange operator aims to beef up its global connectivity on the back of its closer link-ups with bourses on the Chinese mainland.

The international footprint expansion came on the heels of a regulatory nod for the inclusion of more stocks eligible for trading under the stock link-ups between mainland and Hong Kong exchanges.

The broader footprint, adding to the expanded eligible trading that will channel domestic investors into shares of foreign firms primarily listed in Hong Kong, is envisioned to increase the appeal of the Hong Kong market as the destination of choice for multinationals seeking listings, observers said.

Headed by Roger McAvoy, the new office will equip HKEX’s North American customers with an on-the-ground dedicated team, the operator said in a statement.

“The new office will promote HKEX’s liquid primary and secondary cash markets, its exclusive connectivity withmainland markets and its diverse suite of derivatives, which together constitute the Asia-Pacific’s most comprehensive financial market ecosystem,” read the statement.

International investors now account for roughly 41 percent of Hong Kong’s cash equities market trading turnover, with US investors representing 10 percent of total turnover, according to HKEX.

“I have every confidence that [Roger], together with the broader HKEX team, will be successful in supporting our global customers and driving new investors and companies to Hong Kong, the region’s premier international financial center,” HKEX CEO Nicolas Aguzin was quoted as saying in the statement.

The physical presence in New York will complement HKEX’s existing global reach from its Shanghai, Beijing and Singapore offices, according to the exchange operator, which said on Tuesday that it would continue with its plans to open an office in Europe.

The latest move followed an expansion of the stock connect infrastructure that paves the way for international firms that primarily list in Hong Kong to be directly accessible to Chinese mainland investors.

In a joint announcement on Monday, the China Securities Regulatory Commission and the Hong Kong Securities and Futures Commission (HKSFC) said they have agreed in principle to expand the scope of eligible stocks under the trading link-ups between the mainland and Hong Kong.

After the expansion, which will apply to both northbound and southbound trading, the link-ups between mainland and Hong Kong markets are expected to cover stocks that make up more than 80 percent of the equity trading in each market, the HKSFC saidon Monday in a statement.

The expansion of stocks eligible for trading under the stock connect program will offer international investors more choices in mainland shares and consolidate Hong Kong’s position as a gateway to the mainland, said the statement, citing Julia Leung, the SFC’s acting chief executive officer.

“In particular, the inclusion of foreign companies primarily listed in Hong Kong is of strategic importance to Hong Kong as a leading fundraising platform for international companies,” Leung said.

Preparations for the expansion to come into force will take approximately three months and the official launch date will be announced in due course.

Hailing the latest expansion as yet another major step toward two-way financial opening, market watchers are bullish on the prospect of more listings, notably those of foreign businesses, heading toward Hong Kong.

The inclusion of shares of Hong Kong-traded international companies into the trading links means that the country’s financial opening-up measures have been further upgraded and expanded, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Tuesday.

“It would help mainland investors achieve better asset allocation and facilitate cross-border use of the yuan, which is conducive to enhancing people's confidence in and willingness to hold the yuan,” Dong Shaopeng said.

After the expansion, the Hong Kong bourse will surely have a greater mission by attracting more multinational companies to list in the city, Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times on Tuesday.

The mainland will also make more stocks available to Hong Kong investors and leverage the international status of the Hong Kong market to increase the links between the mainland and overseas investors, Dong Dengxin said.

“Trading arrangements under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect will continue to be upgraded, which will also be an important focal point for the integration process of the three markets,” Dong Dengxin said.

More than 70 percent of all international investments into mainland shares are held via the stock connect program, HKEX data showed.