(Yicai) April 25 -- Hong Kong has many advantages for the development of the financial technology sector, whose ecosystem has been growing fast in the city thanks to artificial intelligence and Web 3.0, according to its under-secretary for financial services and the Treasury.

Fintech companies need customers, investors, and partners, which are easy to find in Hong Kong, Joseph Chan said at an investment salon hosted by Yicai yesterday.

Many fintech companies from the Chinese mainland have settled in Hong Kong to access offshore capital and clients, while many from Europe and America have done so to enter the mainland and other Asian markets, he said.

Hong Kong had 1,000 fintech companies last year, up 25 percent from the year before, Chan told Yicai. There were more than 220 Web 3.0-related companies, eight virtual banks, and four virtual insurance companies in the city.

Hong Kong has worked to promote financial innovation, including crossover cooperation and innovation, holding forums, and cultivating financial talent, in addition to policy support, said Han Jienan, an honorary research associate at the University of Hong Kong.

Hong Kong’s fintech industry is also sustainable. The special administrative region has issued green bonds worth about HKD195 billion (USD24.9 billion) to finance a number of local projects, according to official data.

Moreover, Hong Kong has been seizing the opportunities brought by virtual assets. Asia’s first Bitcoin and Ether futures exchange-traded funds debuted on the Hong Kong stock market in December 2022. And the city’s financial regulator has approved the first spot Bitcoin and Ether exchange-traded funds in Asia, enabling them to launch by the end of this month.

Hong Kong will work out the regulatory details to address the actual and potential risks of virtual asset investments, Chan pointed out.

Stock Market Recovery

In addition to Hong Kong’s fintech industry, the salon also considered the city’s stock market, which has sunk over the past four years. As of today’s close, the benchmark Hang Seng Index has fallen about 39 percent since early 2020. It has gained 1.4 percent so far this year.

The market is recovering, and the worst has passed, said Zhao Wenli, chief strategist at China Construction Bank International. But greater confidence and higher valuations will be slow to return, mainly because the timing of lower interest rates in the United States continues to be pushed back, and the size of cuts is also lower than expected, Zhao noted.

China’s securities regulator issued five policies on April 19 aimed at boosting Hong Kong stocks, including expanding eligible stock ETFs under the stock connect schemes with Shanghai and Shenzhen, incorporating real estate investment trusts into the schemes, supporting the inclusion of Chinese yuan stock trading counters in the Stock Connect, optimizing the mutual recognition of funds, and supporting Chinese mainland industry leaders to list in Hong Kong.

The charm and value of the Hong Kong market lie in its global connectivity, Zhao noted, adding that the progress in financial connectivity has created good infrastructure for Hong Kong and enhanced its capacity to connect China with the world.

Editor: Futura Costaglione