Adjustments to post-pandemic finance are setting the stage for a “Big Bang of Finance” led by China, according to the head of Hong Kong’s stock exchange.
Argentinian banker Nicolas Aguzin, the first non-Chinese to head the bourse, said the world needs to prepare for a “once-in-a-generation structural change” to global finance.
He said big policy initiatives such as the US Build Back Better, the European Green Deal, as well as global ‘net-zero transitions’ are not just “green shoots of recovery in the world economy but something more profound”, he wrote in a blog post on Wednesday.
The exchange chief said that although Covid-19 continues to constrain finance, “business and markets, entrepreneurs and environmentalists, job-creators and evangelists continue to connect”.
Aguzin observed that the stream of reforms introduced to China’s financial markets in recent years has already begun the process by which the orbit of global markets has begun to steadily shift towards Asia.
Growing Their Share
“Look firstly at how equity markets in Mainland China and Hong Kong are growing their share of global capital raising ― bringing in a total of $60.3 billion in the first half of 2021, up 95% year-on-year.”
He said China’s bond markets are also transforming. “At $18.6 trillion at the end of 2020, they are now the second-largest in the world having quadrupled in size in just eight years.”
Aguzin said the investor base behind these flows is also changing. “China’s market is opening up and increasingly we are seeing the integration of domestic and international capital flows,” he said.
The yuan represents the “greatest lever for change”, Aguzin added.
“I am convinced it will take on an ever more important role in the global financial landscape. “International demand has grown exponentially through increasing international trade and cross-border investments along with China’s economic growth.”
He said the yuan’s inclusion into the International Monetary Fund’s Special Drawing Rights currency basket in 2016 meant that deep and liquid pools of yuan assets will be essential for international investors in the future.
- George Russell