Hong Kong is 'the only option' for China to connect with overseas markets for now, says expert - CNBC

Ten global partners of Alibaba beat the gong during the company's listing on the Hong Kong Exchanges and Clearing Market on November 26, 2019.

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Hong Kong has been engulfed in anti-government protests for months, but the city's capital markets have remained an important gateway between China and the world, according to an industry association.

That's despite China ramping up efforts to open up its financial sector to foreign investors, said Mark Austen, chief executive at Asia Securities Industry and Financial Markets Association, or Asifma. China has recently announced its plans to scrap limits on foreign stakes and quotas for foreign securities investment.

"China needs to move from an over reliance on bank lending to one where they have a dynamic, liquid capital market to fund their economic growth going forward," Austen told CNBC's "Squawk Box Asia" on Friday.

"But we still see Hong Kong as being that conduit to enter and exit China in the medium term because it's really the only option that exists for China to connect to the outside world," he added.

Hong Kong's edge over China lies in its openness to foreign investors and "strong rule of law," which are important to maintain, said Austen. That appeal is evident in Chinese tech giant Alibaba's recent Hong Kong listing, which attracted strong demand from investors, he noted.

Alibaba's secondary listing — the world's largest offering so far this year — came at a time when business sentiment in Hong Kong has taken a hit amid the protests, which at times involved violent clashes between protesters and the police.

"In spite of what's going on in Hong Kong at the moment, Alibaba has proven that the market (in Hong Kong) is still stable, it's still liquid," said Austen.

Still, China's opening up is a trend that looks set to continue, but the extent and pace depend on financial stability in the country, said Michael Taylor, chief credit officer for Asia Pacific at Moody's Investors Service.

"I think the commitment is very strong. The authorities have shown their willingness to open up markets," he told CNBC's "Street Signs Asia" on Friday.

"Obviously, that's subject to other policy constraints that they have. One of the overarching objectives is to maintain stability. So, any opening up is going to be subject to its impact in terms of overall financial stability."

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2019-11-29 07:20:00Z
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