Hong Kong will link up with more emerging markets, expand financial market interconnections, and help renminbi internationalization steadily to boost financial market ties between the Chinese mainland and the special administrative region, according to Financial Secretary Paul Chan Mo-po.

Chan made the pledge in his blog on Sunday, which marked the 10th anniversary of the launch of the two-way trading link between the SAR and mainland stock markets.

“This institutional innovation has promoted two-way flow of capital between the mainland and the world, allowing international investors to invest directly and conveniently in mainland markets through Hong Kong, and share the nation’s economic development. Mainland investors thus use Hong Kong to allocate overseas assets conveniently for achieving mutual benefit and win-win results,” Chan said.

The finance chief provided data to illustrate the tremendous benefits various market connection programs have brought to the mainland and Hong Kong capital markets.

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The number of eligible stocks under the Shanghai-Shenzhen-Hong Kong Stock Connect has gone up by more than 800 to over 3,300 in the past decade, accounting for 90 percent of the total market capitalization of listed companies in the three markets. The average daily trading volume of Hong Kong stocks reached HK$255 billion ($32.6 billion) in October this year.

Mainland investors’ southbound trading in Hong Kong stocks saw an average daily turnover of HK$38 billion in the first three quarters of this year -- a 40-fold increase from the first month when the Shanghai-Hong Kong Stock Connect commenced in 2014, and accounted for 16.9 percent of the total turnover on the Hong Kong stock market.

The Southbound Stock Connect has become an important channel for mainland public funds, insurance funds, annuity funds and other long-term funds to allocate overseas assets, with the market value of assets held by mainland investors through this program having surpassed HK$3.3 trillion.

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For the northbound trading of mainland stocks by overseas investors through Hong Kong, the average daily trading volume in the first three quarters of 2024 reached 123 billion yuan ($17.01 billion) - up 21 times from the first month when northbound trading began 10 years ago, accounting for 6.7 percent of the total trading volume in the mainland market.  About 77 percent of the total value of mainland stocks held by foreign investors are acquired through the Northbound Stock Connect.

As the stock connect programs expanded steadily over the past decade, the total market value of Hong Kong’s stock market has hit HK$35 trillion so far -- an increase of about 40 percent from 2014, and 11 times the city’s gross domestic product.

In the bond market, approximately two-thirds of global investors’ cross-border bond transactions have been conducted through the Bond Connect.

“The interconnection program has shown great vitality as this is an arrangement that respects local market rules, and is compatible with cross-border investment needs, ensuring that risks are controllable,” Chan said.

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He added that the scope of financial products covered has continued to expand from stocks, bonds and investment products under the Cross-border Wealth Management Connect to exchange traded-traded funds and derivatives for risk management. It was also announced recently that real-estate investment trust funds will be included.

Chan said Hong Kong will further develop financial market links through three directions.

“Besides connecting the traditional European and American markets, we must also link up with emerging markets with large populations, rapid economic and income growth, and meet the diversified asset allocation needs of international and mainland investors,” he said. “In this regard, Hong Kong is working hard to strengthen its connections with global southern markets, strive for more local high-quality companies to be listed in the SAR, and launch more cross-border investment products, such as ETFs listed in Hong Kong that invest Saudi Arabian stock indices, and ETFs listed in Saudi Arabia that invest Hong Kong stock indices last year.”

Hong Kong can further better play its “firewall” and “test-field” roles and act a capital-leading platform, Chan said. “As the country promotes itself as a strong financial nation, actively deepening the reform of the financial system, and promoting high-level opening up to the outside world, we will further enrich product categories, expand the scope of targets, continue to promote various policy and product innovations under controllable risks, and contribute to national development.”

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He stressed that the unique advantage of the financial market links can be leveraged to promote renminbi internationalization steadily and prudently.

“In the past few years, from the Bond Connect to the Swap Connect and the renminbi stock trading counters to be included in the stock connect programs, they have enriched the types of offshore renminbi investment products and risk management, allowing offshore renminbi holders to have more investment options and risk management tools, which will help promote more investment and trade to be settled in renminbi, and increase the share of the yuan as a reserve currency,” Chan said.