In early 2025, the global capital market witnessed a dramatic 'choice'. Southeast Asian tech giant Grab ultimately chose to conduct its primary listing in its home base, Singapore, rather than in nearby Hong Kong. Almost simultaneously, the market buzzed with news that Saudi Aramco was actively considering spinning off its massive trading business, potentially establishing an international energy trading center in Hong Kong or Singapore. These developments served as a mirror, reflecting the subtle yet real competitive pressures facing Hong Kong as an Asian financial center—it not only needs to accommodate the return of China-concept stocks but must also proactively compete for the next generation of 'anchor' assets from around the world, particularly emerging markets.
Surface data remains impressive. According to market data released by HKEX, in the first five months of 2025, the average daily turnover of Hong Kong stocks surged by 120% year-on-year, and IPO fundraising skyrocketed by 709%. The Global Financial Centres Index from the UK's Z/Yen Group shows Hong Kong firmly maintaining its position among the top three globally. Yet, beneath this prosperity, a deep strategic anxiety permeates Hong Kong's financial policymakers. In December 2025, the Hong Kong Financial Services Development Council (FSDC) released its Concept Paper No. 72, "The Way Forward for Hong Kong’s Capital Markets: The Super Connector – A Global Capital Hub in the Digital Age." This report is a concentrated manifestation of this anxiety and resolve. Its value far exceeds that of an ordinary industry plan; it is essentially a public act of strategic "self-diagnosis" and "route reconstruction." Its core proposition is: Can Hong Kong, and how can it, transcend its traditional role as a "super connector" and transform into an autonomous "global capital hub"?
I. Strategic Upgrade: The Inevitable Shift from 'Conduit' Logic to a 'Hub' Ecosystem
The report's vision is stated upfront: building a digital global capital ecosystem with near-seamless flows of funds, assets, and information. This is not a description of the status quo but a fundamental reshaping of the development paradigm. For decades, Hong Kong's success was built on a unique "conduit" logic: backed by Mainland China, facing the global market, acting as a "super connector" for capital flowing in and out of the mainland. This model achieved its glory, with global IPO fundraising often ranking at the top.
However, the FSDC report soberly points out that the world has changed. Geopolitics has led to a "systemic restructuring and rerouting" of capital flows. The core of global financial center competition has shifted to "the level of digitalization and technological benchmarks, the degree of trust in market institutions, and the ability to practically meet the actual needs of the new generation of issuers and investors." The "conduit" model, which relies solely on geographical advantages, is increasingly revealing its fragility—flow can plummet due to policy or external environmental changes, and its functions can be partially replaced by other emerging connectivity mechanisms.
Therefore, the new positioning of a "global capital hub" proposed in the report represents a profound strategic upgrade. Its connotation is reflected in three dimensions: Functionally, shifting from a passive "fund transmission pipeline" to an active "capital formation, pricing, and allocation platform"; Geographically, expanding from focusing on "north-south" (connecting China and the West) to building "east-west capital channels" spanning Asia, the Middle East, and Europe; In terms of development drivers, moving from relying on "location红利 (dividends)" to building core competitiveness through "institutional innovation" and "technological infrastructure."
To support this shift, the report systematically proposes a "4Is" strategic framework, aiming to comprehensively upgrade four key pillars: Issuers, Investors, Intermediaries, and Instruments. These four pillars are interconnected, designed to form a positive feedback loop ecosystem: attracting diversified, high-quality issuers brings rich financial instruments; rich instruments and active trading attract global, diversified long-term investors; the deep participation and complex needs of investors, in turn, drive intermediaries to enhance service capabilities and financial innovation. The operating efficiency of this loop ultimately depends on the support of digitalization and market infrastructure. This is fundamentally different from the past emphasis on the single function of financing through IPOs, marking a systematic, ecological turn in Hong Kong's capital market development strategy.
II. Tackling the '4Is': Upgrade Paths, Challenges, and Digital Enablement for the Four Pillars
The "4Is" framework in the report is the core of strategy implementation, but upgrading each pillar faces specific and profound challenges, requiring dual enablement from both systems and technology.
Issuers: The Challenge of Expanding from 'Gateway to China' to 'Global Stage'
The report's goal is to enrich the issuer structure, moving beyond reliance on Mainland Chinese companies. The short-term strategy is to optimize the listing system (e.g., relaxing rules on weighted voting rights) to attract more international companies for primary or secondary listings. The medium-term hope is to expand the "Connect" schemes to derivative instruments and alternative assets.
The core challenge lies in persuading international companies. For mature欧美 (European and American) companies, the valuation and liquidity of the Hong Kong market may not match their home markets; for Southeast Asian and Middle Eastern companies, barriers exist in Hong Kong's legal and accounting environments and investor recognition. The "phased access" model proposed in the report—starting with a secondary listing, then transitioning to a dual primary listing and inclusion in Stock Connect upon meeting criteria—is a pragmatic design, but its attractiveness depends on the pace of Mainland capital account liberalization and the determination to expand Stock Connect. Furthermore, traditional investment banks and law firms face tests in their pricing power, sales networks, and compliance experience when serving these new, diverse types of issuers.
Investors: The Product and Channel Dilemma in Attracting 'Patient Capital'
Attracting long-term capital like pension and insurance funds is a top priority of the report. This requires Hong Kong to provide assets that match their long-term liabilities, seek stable returns, and can hedge risks.
The core challenge is that Hong Kong lacks sufficient long-term, high-rated, HKD-denominated fixed-income products. The report proposes developing green bonds, infrastructure bonds, and private credit. However, the green bond market is still dominated by issuance rather than active secondary trading; infrastructure project investment is complex and long-cycle; private credit lacks standardization and transparency, making it difficult to include in the常规 (regular) allocation range of large institutions. Technological enablement is particularly crucial here. For example, through asset tokenization, large infrastructure projects or private credit assets can be "sliced," lowering investment thresholds, enhancing liquidity, and enabling near-real-time收益分配 (income distribution), thereby increasing their appeal to "patient capital." The HKMA's digital bond and the EvergreenHub knowledge platform mentioned in the report are attempts in this direction.
Intermediaries: Pressure for Capability Reshaping and Ecosystem Synergy
Intermediaries are the blood vessels connecting issuers and investors. The report calls on banks, brokerages, and market makers to enhance their capabilities to support complex markets like fixed income, derivatives, and digital assets.
The core challenge is capability mismatch and lack of incentives. Hong Kong's investment banking ecosystem has long served equity IPOs; its professional depth and talent pool in areas like complex debt structuring, interest rate derivatives market making, and digital asset custody lag behind New York and London. Simultaneously, in thin bond markets, market makers lack sufficient incentive to maintain two-way quotes. The report implicitly calls for regulatory reform and incentives, such as optimizing trading systems, providing liquidity support for market-making activities, or tax benefits. Digitization reshapes intermediaries from another dimension: smart contracts can automatically execute corporate actions like bond coupon payments, reducing manual errors and operational risks; blockchain platforms can improve the transparency and efficiency of post-trade processes, lowering the operational costs for intermediaries.
Instruments: The Difficult Leap from 'Equity-Dominated' to 'Multi-Asset Driven'
Enriching financial instruments is the foundation for increasing market depth and attracting diverse investors. The report lists developing derivatives, commodities, sustainable finance products, and alternative investment tools.
The core challenge is the liquidity dilemma and regulatory complexity. The success of a new financial product market requires network effects formed jointly by issuers, market makers, and investors. Examples of Hong Kong launching new products that subsequently suffered from thin trading are not uncommon. For instance, while it has one of Asia's most active equity derivatives markets, it still lags far behind in complex derivatives like interest rate and credit. Developing these products requires a highly mature institutional investor base, sophisticated risk management systems, and a matching regulatory framework. The report's proposed "pilot innovative products" approach is cautious but requires a precise balance between the scale, speed, and risk tolerance of the pilots. Digitization offers new possibilities: blockchain-based derivative contracts can enable automated collateral management and settlement, reducing counterparty risk and thus encouraging more participants to enter.
III. The Key Battle: Reshaping the Listing Regime, Competing for the Pricing Power of 'Future Assets'
Within the "4Is" framework, attracting quality issuers is the logical starting point, and the competitiveness of the listing regime is the primary battlefield. The report spares nearly ten pages to deeply analyze and recommend optimizations for the Weighted Voting Rights (WVR) structure, hitting the nail on the head.
From its introduction in 2018 to mid-2025, over seven years, only 31 companies listed in Hong Kong using this structure, accounting for about 4% of total IPOs in the same period. This number stands in stark contrast to the Silicon Valley and global tech startup wave. For example, research by University of Florida finance professor Jay Ritter shows that since 2020, over 40% of tech IPOs in the US have used dual-class share structures. Hong Kong's caution and the widespread acceptance in the US form a clear gap.
Appendix IV of the report provides a detailed comparison of regimes in major global jurisdictions, revealing Hong Kong's "conservatism." Compared to the US, which has no hard cap on voting rights ratios, and the UK, which post-2024 reform removed the market capitalization threshold retaining only a "three-year operational track record" requirement, Hong Kong's framework sets a double high bar: Qualitatively, the issuer must be an "Innovative Company" as recognized by HKEX; Quantitatively, the market cap must reach HK$40 billion, or "HK$10 billion market cap + HK$1 billion revenue." These two thresholds may shut out a large number of "hard tech" companies in high-growth phases that are not yet profitable or haven't reached giant规模 (scale).
A deeper constraint lies in the limitations of the "Qualifying Exchange" list. Currently, only companies primarily listed on the New York Stock Exchange, Nasdaq, or London (Premium Listing) can retain their WVR structure when conducting a secondary listing in Hong Kong. This means that a large number of excellent companies listed on Euronext, the SIX Exchange, or other quality markets in Asia cannot easily use Hong Kong as their Asian financing and liquidity management platform. This无形中 (invisibly) limits the international diversification of Hong Kong's listing resources.
The FSDC report essentially sends a clear signal: in the fierce global competition to attract listings from the next generation of tech companies (e.g., AI, biotech, clean energy), Hong Kong's current institutional flexibility is insufficient. If it cannot provide founders with control guarantees like New York or reduce listing costs and complexity like London, Hong Kong will face continued passivity in attracting "future assets." This is not just about modifying a few rules; it is a battle for "pricing power" concerning the future vitality and valuation benchmarks of Hong Kong's capital market.
IV. The Infrastructure Battle: The 'Race Against Time' of Digitalization and the Efficiency Revolution
The implementation of all strategies relies on efficient, robust, and future-oriented market infrastructure. The report warns at great length that this is an "efficiency revolution" concerning survival, and Hong Kong can no longer afford to lose.
Global post-trade systems are iterating at an astonishing speed. The US fully transitioned to T+1 settlement in May 2024, Europe plans to follow in 2027, and India has even begun T+0 pilots. Although HKEX has initiated a T+1 consultation, the report clearly states that the transition involves complex upgrades across the entire value chain of brokers, custodians, and settlement, and is "a multi-year transition project." Efficiency is competitiveness;滞后 (lag) in clearing and settlement directly means higher capital occupancy costs and counterparty risk. In the eyes of institutional investors, this is a hard indicator for assessing market attractiveness.
Simultaneously, digital financial infrastructure represented by blockchain and tokenization is reshaping the market形态 (landscape). Hong Kong shows前瞻性 (forward-looking)布局 (positioning) in this race. From the HKMA leading the issuance of the world's first tokenized green bond in 2023, to the CMU system supporting multi-currency digital bond issuance, to continued participation in the BIS "mBridge" cross-border CBDC project, Hong Kong is attempting to integrate Distributed Ledger Technology (DLT) into the mainstream financial system. The goal of these explorations is not to replace traditional finance but to significantly enhance market efficiency and create new product forms (e.g., tokenized real estate, private fund shares) by achieving near-real-time asset settlement, programmable financial contracts, and broader asset accessibility. This requires regulation and innovation to proceed in parallel, clarifying virtual asset licensing and stablecoin regulatory frameworks while encouraging fintech innovation that meets regulatory requirements.
V. Challenges and Games: Three Deep-Seated Contradictions in the Transformation
This ambitious report does not shy away from the difficulties ahead. It actually reveals three deep-seated contradictions that Hong Kong must directly face and resolve on its path to becoming a "global capital hub."
First Contradiction: Mismatch between short-term market structure and long-term strategic goals. Although the report outlines a blueprint for a multi-asset hub, the现状 (status quo) of Hong Kong's "strong equities, weak bonds" and lack of liquidity in small and mid-cap stocks is deeply entrenched. The report even discusses the feasibility of providing "stamp duty宽减 (concessions)" for stocks with chronically low liquidity, which反而衬托出 (instead highlights) the棘手性 (intractability) of the problem. Attracting long-term capital requires a deep bond market, and the deepening of the bond market requires the participation of more long-term capital—this is a "chicken and egg" cycle. Breaking it requires the government to持续 (continuously) issue long-term bonds to build the yield curve and design incentives to guide private sector issuance.
Second Contradiction: The 'Double-Edged Sword' effect of geopolitics and path dependency risk. The report views the return of China-concept stocks as an important opportunity, which is indeed Hong Kong's unique advantage. However, over-reliance on a single source of issuers may bind the market cycle more deeply to the policy risks of a specific region. At the same time, attracting mature欧美 (European and American) companies to list in Hong Kong faces substantive obstacles: for example, the EU's MiFID II requires traders to prioritize routing EU equity orders to "equivalent" third-country markets, and Hong Kong has not yet obtained this recognition. This limits the benefit to本土 (home market) liquidity for European companies listing in Hong Kong. Turning to Middle Eastern and Southeast Asian markets requires overcoming a series of non-institutional barriers such as legal, accounting, and cultural认知 (perception).
Third, and most core, Contradiction: The inherent tension in regulatory philosophy. Reading through the report, phrases like "worthy of further study" and "subject to further study by regulators and the market" appear frequently. This accurately reflects the eternal trade-off Hong Kong regulators face between "enhancing market competitiveness" and "maintaining market stability and investor protection." Any major institutional breakthrough, such as relaxing WVR thresholds or introducing new digital asset products, requires regulators to make precise and timely judgments in a rapidly changing market. Being too conservative may miss opportunities; being too aggressive may引发 (trigger) risks. This report points the direction, but how to grasp this "度" (degree) will be the biggest test for the SFC and HKMA in the coming years.
A Self-Revolution Concerning the Future
The FSDC's Concept Paper No. 72 is less of a development plan and more of a manifesto of strategic awakening. It marks a fundamental shift in the mainstream narrative of Hong Kong's capital market: from enjoying the conduit红利 (dividends) of the "super connector" to致力于 (committing to) building an autonomous "global capital hub" with its own ecological capabilities. This shift is an active response to the new form of globalization and the new landscape of capital competition.
The success of the report lies in its systematic diagnosis and coherent logic. It outlines a clear upgrade path by协同发力 (coordinated efforts) across four dimensions: institutions, products, capital, and infrastructure. However, the true value of the report will depend on its "execution conversion rate."
Hong Kong's competitive landscape has quietly changed. It is no longer just a ranking competition within Asia, but a top-tier race to participate in defining the rules of the future financial system against the backdrop of the dual revolutions of global capital and technology. Hong Kong needs to prove that it can become a "trusted neutral platform" that transcends geopolitical fluctuations and exists based on institutional credibility, market efficiency, and technological enablement.
The road ahead is注定 (destined) to be uneven, filled with the博弈 (games) and compromise of the aforementioned three contradictions. But this report at least clearly points the direction: The future of Hong Kong's capital market does not depend on past glory, but on the courage, wisdom, and execution power of its self-revolution. This profound restructuring has already begun. Its success or failure will determine Hong Kong's place on the global financial map for the next decade.
Partial source materials:
· "HKEX Disclosure: Average Daily Turnover in First Five Months of Year Up 120% YoY"
· "The Way Forward for Hong Kong’s Capital Markets: The Super Connector – A Global Capital Hub in the Digital Age"
· "HKEX Releases H1 2025 Market Highlights Data, Strong Secondary Market Performance"
Author: Liang Yu Edited and Reviewed by: Zhao Yidan
