City overtakes US, UK and Singapore to take top spot

Hong Kong has overtaken the US, the UK and Singapore to top the world's most developed financial markets, the first time an Asian financial center has achieved this rank, according to the latest study of the World Economic Forum.

The report ranks 60 of the world's leading financial systems and capital markets based on 120 variables including institutional and business environments, financial stability, and size and depth of financial markets, among other factors.

The composition of the top 10 economies has remained largely unchanged from last year, the only change being Norway's replacement of Belgium in 10th place.

Hong Kong moves up three spots to rank first in the index this year, the first time that an Asian economy has secured the top standing. Its rise to the top was facilitated by strong scores in non-financial banking services such as IPO activity and insurance.

The US drops to second place. Financial stability remains a concern there, according to the report. The UK comes in third, dragged down by lower scores on securitization and IPO activity. Singapore falls one spot to fourth place. The securitization markets drying up and a weakening banking system are blamed for the decline.

"Hong Kong's ascent to the top of our index marks a major milestone, the first time in the report's history that the United Kingdom or the US didn't come out on top," Kevin Steinberg, chief operating officer of World Economic Forum USA, said in a statement accompanying the report.

"While Western financial centers are understandably focused on short-term challenges, this report should serve as a wake-up call that their long-term leadership may be in jeopardy," he added.

Hong Kong is among the few that have seen improvement in non-banking financial services such as IPO activity and insurance as the city jumps nine and five spots in these indicators. This reflects the resilience of Hong Kong's financial intermediation services in a time of great uncertainty and volatility, says the report.

The city has been the world's hottest IPO market for the past two years, with funds raised amounting to HK$449 billion in 2010. And Hong Kong ranked second after the New York Stock Exchange for IPO fundraising in the first half of this year, with HK$182.2 billion raised during the period.

Access to commercial capital is noted to be Hong Kong's strong suit in the report, bolstered by robust equity market financing and foreign direct investment. But securitization and bond market development leave much to be desired, while tertiary enrollment, the cost of registering property and the time to register property are some of the areas where improvement is needed to create a better business environment, according to the report.

Considerable declines in financial intermediation scores across the majority of countries point to the challenge that advanced economies generally face in making new credit more available to support economic growth, says the report.

"The need to make different forms of capital available will be essential for future growth and recovery," editor of the report Isabella Reuttner commented.

Strong financial intermediation results, together with increasing financial stability, have enabled the mainland to move up three places to finish 19th in the index.

emmaan@chinadailyhk.com

China Daily

(HK Edition 12/14/2011 page2)