Despite the sluggish stock market in Hong Kong last year with IPO funding hitting a 20-year low, the city maintains its critical role as an intermediary for capital flows between the Chinese mainland and global markets. Amid share price volatility, geopolitical tensions and an aging society, HK’s financial institutions are shifting focus to wealth inheritance, pensions and medical investments to manage risks. As the first pilot zone for cross-border digital yuan settlement and a key supporter for Chinese enterprises especially the high-tech and green sectors, HK is vital to China’s global connectivity. Pressure on HK’s equity market is expected to ease if the US Federal Reserve cuts interest rates. Nevertheless, experts advise China to modernize its financial institutions, recognizing that foreign exchange controls are inconsistent with cross-border allocation. Hong Kong is where the reform can start.
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