As Hong Kong is undergoing economic transformation on the way towards building a stronger economy, the government of the Hong Kong Special Administrative Region has pledged to further reform the city’s financial infrastructure, with a focus on enhancing the New Capital Investment Entrant Scheme to bolster the SAR’s asset and wealth management business.

“We will harness the asset-reallocation wave of global investors to cement our status as an international financial center through deepening the equity market as well as expanding a world-class bond market and a vibrant currency market,” Chief Executive John Lee Ka-chiu said in his fourth Policy Address speech.

The administration proposed exploring the possibility of shortening the stock trading settlement cycle to T+1. Government sources said that Hong Kong Exchanges and Clearing (HKEX) plans to consult the industry in the first half of next year, aiming to become one of the first jurisdictions in the region to implement T+1. The implementation progress will depend on industry response and technical feasibility, such as how the share trading and settlement systems of the Hong Kong Stock Exchange and stockbrokers can be aligned.

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Regarding the bond market, the Hong Kong Monetary Authority’s CMU OmniClear and HKEX will explore centralized management and the cross-collateralization of investors’ share and bond assets on a single platform for enhancing the Hong Kong bond market infrastructure. The Securities and Futures Commission (SFC) is studying the feasibility of an innovative electronic bond-trading platform built and operated by market participants.

For the currency market, the HKMA will make use of the currency swap agreement with the People’s Bank of China and introduce a renminbi business facility to provide renminbi financing for enterprises to conduct trade financing, daily operation and capital expenditure. Government sources said the HKMA will continue to explore how to facilitate direct currency exchange between renminbi and other currencies so that enterprises can acquire stable and relatively cheap cross-boundary capital funding.

“The many initiatives in primary and secondary markets and across asset classes will drive the sustainable development of Hong Kong as an international finance center and further elevate the breadth of the city’s financial ecosystem,” HKEX Chairman Carlson Tong Ka-shing said.

The SFC said the initiatives of the fixed income and currency markets will significantly diversify Hong Kong’s markets and raise its appeal to global investors.

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The government will also enhance the New Capital Investment Entrant to boost the city’s asset and wealth management sector. First, the maximum amount of investment to be counted will be raised from HK$10 million ($1.28 million) to HK$15 million for buying non-residential properties with no transaction price threshold. Regarding residential properties, the investment to be counted will continue to be capped at HK$10 million, but the transaction price threshold will be lowered from HK$50 million to HK$30 million.

Government sources said the lowering of the residential transaction threshold would not affect the home buying market for Hong Kong residents. They stressed that the performance of the property market is not the government’s main consideration when making policy refinements, but rather it hoped to increase investors' flexibility in choice and the attractiveness of the plan.

“The reduction of the investment threshold for residential properties from HK$50 million to HK$30 million is expected to boost demand for luxury apartments and houses,” CBRE Hong Kong Head of Research Marcos Chan noted.

“This adjustment is expected to further stimulate transaction volumes and support the recovery of Hong Kong’s commercial real estate market, particularly benefiting strata-office and retail shop sales,” argued Thomas Chak, head of Capital Markets & Investment Services at Colliers.