Financing Asia’s Growth: The “Big Bang of Finance”

Hong Kong Stock Exchange CEO Nicolas Aguzin shares his predictions for Hong Kong’s financial future.

Photo: Ansel Lee via Pexels

As the aftermath of the 2019 protests continue and the presence of the National Security Law looms large, many have speculated whether Hong Kong will retain its privileged status as a global financial centre. New national security regulations are forcing multinational companies to reevaluate the benefits of staying in the city, while tech giants such as Google and Facebook have threatened to withdraw from Hong Kong over a proposed anti-doxxing law.

However, newly appointed CEO of the Hong Kong Stock Exchange Nicolas Aguzin thinks otherwise. This past Thursday, Aguzin dropped by Asia Society Hong Kong to discuss Hong Kong’s future as an international financial hub.

An Optimistic View for Hong Kong’s Future

Aguzin stresses the value of Hong Kong’s long term advantages: free flow of capital, rule of law, reliable infrastructure and one of the best regulatory environments in the world. 

“Our best years are ahead of us,” he says.

Aguzin also highlights the Greater Bay Area as an initiative that will bring major benefits to the city, with new policies such as Wealth Management Connect set to provide the Hong Kong financial services sector with even greater access to mainland investors. One of Hong Kong’s few shortcomings is its limited population of 7 million, Aguzin explains. Access to a population of 70 million entirely changes the equation.

The “Big Bang of Finance”

Over the next 5-10 years, Aguzin believes China will experience what he calls “the Big Bang of Finance”. He claims, “this will be the biggest creation and movement of money history has ever seen, and Hong Kong will be right in the middle of it.” 

As international investors go into China and the Chinese domestic savings machine goes outward, he explains, the HKEX will be placed in a pole position to facilitate connectivity between East and West and create a long-term platform for stability.

In order to keep capital flowing in, Hong Kong must focus on its strategic advantages, Aguzin says. After all, Hong Kong has the unique status of being the most Chinese city outside of mainland China, and the most international city inside China, providing it with access to investors from China and from all over the world.

Aguzin also downplayed any potential rivalry with the Shenzhen and Shanghai Stock Exchanges, arguing that each market will have its own part to play. 

“As long as the pie keeps getting bigger, everyone will benefit.”

“This will be the biggest creation and movement of money history has ever seen, and Hong Kong will be right in the middle of it.”

• NICOLAS AGUZIN (HKEX CEO)

Despite his optimism, Aguzin acknowledges the prospect of a dramatic US-China delinking. 

“The trend is very strong,” he admits. “But we can try to slow it down.” 

Aguzin promises that the HKEX will do its best to ensure that both sides continue to speak to each other, at least in the business sector. He also cites the important influence of the corporate sector in US policy-making – “the more strongly that corporations feel that it is important for them to be here, the more likely that they will be.”

Growth of the RMB; concerns with the USD?

With its position as a connector between East and West, the future of the RMB and the USD will be closely tied to the growth of Hong Kong’s financial markets.

“The opportunities for investing and financing in RMB assets have gone up,” Aguzin says. 

Once the tightly-controlled currency of an isolated state-owned economic system, the RMB is now beginning to move more freely as China’s market-driven economy slowly opens up. Aguzin points to the growing percentage of RMB held as reserve currency around the world as a sign of progress.

However, RMB is rarely used for transactions outside of mainland China – and for obvious reasons. The Chinese government continues to impose rigid regulations on capital outflows to control exchange rates. Aguzin believes that, given the restrictions it is under, the RMB is unlikely to ever displace the US Dollar as the reserve currency of the world.

Aguzin also raises concerns about the stability of the US Dollar, specifically with regard to its usage to stimulate the economy through expansionary policy. In recent weeks, worries around growing inflation and rising producer prices in the US have sent ripple effects through financial markets around the world.

Despite upwards pressure on wages, Aguzin admits that the US economy may well be fine, thanks to improvements in productivity and technology. Nevertheless, accelerating inflation in the US will be something to keep a close eye on over the coming months.