Small HK brokers 'cut off from' boom

Updated: 2017-03-14 09:13

By Luo Weiteng and Luis Liu(HK Edition)

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Small and medium-sized brokerages in Hong Kong seek greater policy support so they can reap the fruits of the potentially huge opportunities the country's rapid development offers, a member of the nation's top political advisory body and Hong Kong lawmaker said.

The hundreds of local small and medium-sized brokers gave strong backing to Hong Kong when the city weathered the storm of the Asian financial crisis which broke out in 1997. These brokers should play a role in the growing integration of financial markets across the boundary, as well as the mainland-spearheaded Belt and Road (B&R) Initiative, said Christopher Cheung Wah-fung, a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) from Hong Kong, who is also founder and chief executive of Hong Kong-based Christfund Securities.

However, they were left out from the development due to certain policy obstructions, Cheung said. "If small and medium-sized businesses cannot benefit from the integration across the boundary, the overall social atmosphere may become anxious and disappointed, which would, in turn, bring about social problems," Cheung cautioned.

He made the comment in an exclusive interview with China Daily in Beijing during the nation's annual two sessions.

Since Hong Kong's reunification with the country in 1997 the financial services sector, one of the twin pillars of Hong Kong's economy, has seen tremendous growth. Daily stock market turnover has surged from HK$10 billion or HK$20 billion a day at that time to the present, when it averages more than HK$60 billion and can exceed HK$100 billion.

However, small and medium-sized brokers, whose clients were mainly retail investors within Hong Kong and relied largely on commission to make a profit, had struggled to obtain a share of this "development dividend", Cheung said. He is also a member of the Legislative Council, representing the financial services constituency.

As Asia's financial hub fielded a cluster of massive initial public offerings (IPO) from cash-rich mainland enterprises, including the $7.4-billion listing by State-owned Postal Savings Bank of China in September last year, the $4.5-billion IPO of Huatai Securities in 2015 and the $3.7-billion IPO of Dalian Wanda Commercial Properties in 2014, much of the business and potentially fat profits went to large investment banks and brokerages who targeted institutional investors.

"There is not much left for us," Cheung noted.

The Shanghai and Shenzhen stock-connect trading links have strengthened ties between financial markets on the mainland and in Hong Kong, but small and medium-sized brokers are still denied access to the vast mainland market; they are largely barred from setting up shop and approaching retail investors across the boundary, Cheung said.

The Closer Economic Partnership Arrangement (CEPA) intends to remove cross-boundary trade barriers in services and let more Hong Kong professionals boost their presence on the mainland. But the city's cash-strapped small and medium-sized brokerages found it hard to satisfy the requirements.

"This is not only an economic but also a social problem," Cheung said. Behind those small brokerages are tens of thousands of middle-class families who anchor their lives and investments in Hong Kong, he said.

It had, to some degree, disappointed the local middle-class' confidence in putting in effort as the nation pushes forward the integration, Cheung said. And he felt this "left out" feeling also played a role in the recent political wrangling that happened in the city.

Thus, Cheung hoped more measures can be taken, more gates can be opened for those who were left out in the nation's economic development.

This problem of being overshadowed by the big banks and brokerages also applied to the mainland-led B&R Initiative. "Hong Kong's smaller brokers have yet to be given the green light to open branches in countries and regions along the B&R, thus making the retail investors in those new markets basically out of reach," Cheung noted.

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Small HK brokers 'cut off from' boom

(HK Edition 03/14/2017 page5)