WEBVTT - HKEX CEO Bonnie Chan Talks HKEX Connect Summit

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<v Speaker 1>The Hong Kong Stock Exchange held the hk EX Connect

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<v Speaker 1>Summit Monday to mark the tenth anniversary of the city's

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<v Speaker 1>cross border stock link. For more on the celebration, Bloomberg

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<v Speaker 1>Steven Engel spoke with hk EX CEO Bondi.

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<v Speaker 2>Chin on a very momentous occasion, the tenth anniversary. Well,

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<v Speaker 2>yesterday was I believe of the stock connect program Shanghai

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<v Speaker 2>first and shen Jen a couple years later, obviously resounding

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<v Speaker 2>success according to your assessment, surely, but there's room to grow.

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<v Speaker 2>How would you say from that tea house meeting between

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<v Speaker 2>Charles Lee of the hk EX and also I believe

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<v Speaker 2>the Shanghai Boyds chairman back in twenty twelve, that would

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<v Speaker 2>grow to this size.

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<v Speaker 3>Yeah, thank you, Steve. And it's certainly a very momentous moment.

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<v Speaker 3>Ten ten years of the connect story. I think we're

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<v Speaker 3>still actually at the beginning. If you look at the

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<v Speaker 3>volume so far from the very beginning, southbound traffic has

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<v Speaker 3>actually grown fifty times, and no found traffic has also

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<v Speaker 3>grown twenty five times. And this is quite amazing. And

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<v Speaker 3>if you ask me how we're going to continue to

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<v Speaker 3>expend it, I'll say three ways that we're going to

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<v Speaker 3>do it. First of all, products, we need to put

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<v Speaker 3>a more products onto the shelf. As you know, we

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<v Speaker 3>started with stock and then we expanded it to include

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<v Speaker 3>bonds ETFs. We're going to soon have reads.

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<v Speaker 2>But there is Can I jump in and say there's

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<v Speaker 2>no date.

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<v Speaker 3>Yet, Well, we're working on the details. I mean, certainly

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<v Speaker 3>with every enhancement, we need to make sure that you know,

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<v Speaker 3>all the screws are tieden up, uh and there is

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<v Speaker 3>still a lot of a lot of white space that

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<v Speaker 3>we can fill in. So that's the first dimension. Secondly,

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<v Speaker 3>the micro infrastructure, which is very important. We need to

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<v Speaker 3>make sure that the users of the Connect franchise have

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<v Speaker 3>a good experience. And I think you know, very recently

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<v Speaker 3>we've proven that with micro infrastructure changes, the market can

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<v Speaker 3>be greatly enhanced severe weather trading as an example. I

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<v Speaker 3>think we've proven to the world that you know, Hong

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<v Speaker 3>Kong as a market has stepped up to that moment.

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<v Speaker 3>And then third, but not you know, the last it's

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<v Speaker 3>the fact that at the moment, you know, the participants,

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<v Speaker 3>I think it's still a relatively small pole. I've been

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<v Speaker 3>traveling a lot recently and I would say that you know,

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<v Speaker 3>the Connect story is still pretty novel to a lot

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<v Speaker 3>of our friends in the world, and so I'm going

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<v Speaker 3>to go out there and continue to market the Connect story.

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<v Speaker 2>You've traveled a lot. You've been obviously to Riad, You've

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<v Speaker 2>been back and forth to Shanghai and Beijing. You just

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<v Speaker 2>came back from Lima. Apeg that's right. What was the

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<v Speaker 2>key takeaway there? Before we get into these steps, we

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<v Speaker 2>need to talk about primary connect and the other things

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<v Speaker 2>that have been promised but have not delivered. But what

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<v Speaker 2>did you what was your key takeaway quickly on Apec?

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<v Speaker 3>Okay, so my first takeaway from APEC is that I'm

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<v Speaker 3>very happy to see that countries are still very willing

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<v Speaker 3>and keen to make friends with one another. So, you know,

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<v Speaker 3>while I hear a lot about you know, geopolitics and

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<v Speaker 3>all that and how it's going to jump down markets,

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<v Speaker 3>what I saw on Lima is quite the contrary. So

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<v Speaker 3>that is a big encouragement. And secondly, the reason why

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<v Speaker 3>I'm traveling so much is really to get you know,

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<v Speaker 3>the story of Hong Kong and connect out to the

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<v Speaker 3>rest of the world. You know, in this region, I

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<v Speaker 3>think a lot of people understand, you know, the impact

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<v Speaker 3>of Connect and what it brings in terms of enhancing

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<v Speaker 3>the two way capital flows between China and the rest

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<v Speaker 3>of the world. But a lot of you know, the

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<v Speaker 3>rest of the world, it's still you know, learning about it,

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<v Speaker 3>and so it's important for that kind of engagement.

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<v Speaker 2>Would you say the Connect program still though, has its

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<v Speaker 2>training wheels on. I mean there's a bit of shackles

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<v Speaker 2>and there's been promises to grow it. Primary Connect is

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<v Speaker 2>the big one, obviously. Charles Lee back in twenty seventeen

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<v Speaker 2>said this is the next big thing, right, This market's

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<v Speaker 2>been waiting for that. Chinese investors have been waiting for

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<v Speaker 2>this to get these primary listings into the stock Connect

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<v Speaker 2>some would say that it held back a Ramco from

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<v Speaker 2>even thinking about Hong Kong.

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<v Speaker 3>Well, it's very interesting you talk about, you know, how

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<v Speaker 3>everyone is waiting for it. I think that basically showed that,

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<v Speaker 3>you know, the Connect franchise has a lot of promise,

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<v Speaker 3>and in fact, I think the eagerness really stems from

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<v Speaker 3>the fact that a lot of investors around the world

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<v Speaker 3>want to take advantage of the growth of the China market,

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<v Speaker 3>both in terms of what corporates it's turning out right,

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<v Speaker 3>those are great investment opportunities as well as the investor

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<v Speaker 3>base that China as a country is capable of providing

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<v Speaker 3>the world. So my duty, my responsibility running the change

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<v Speaker 3>is really to continue to build it with those three

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<v Speaker 3>dimensions I just mentioned.

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<v Speaker 2>Sure, so Northbound has been pretty fruitful for international exposure

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<v Speaker 2>into China. I think over the past decade foreign holdings

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<v Speaker 2>of Chinese stocks have jumped more than twenty four But

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<v Speaker 2>this primary connect would allow mainland investors to come in

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<v Speaker 2>and participate in what used to be the one of

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<v Speaker 2>the hottest IPO markets in the world. Right, So what's

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<v Speaker 2>holding it back?

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<v Speaker 3>Oh? Well, okay, so you're absolutely correct that there is

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<v Speaker 3>a lot of interest. In fact, if you think about

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<v Speaker 3>the reason Raley, we had at the end of September

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<v Speaker 3>and early October, we saw a very big jump in

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<v Speaker 3>terms of self bound flow, and I think that illustrates

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<v Speaker 3>the fact that, you know, there's a lot of accumulation

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<v Speaker 3>of wealth in the mainland, a very fast growing middle class,

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<v Speaker 3>and they're looking for diversification, right, And therefore I think

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<v Speaker 3>what we have to do at HKIX is really to

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<v Speaker 3>continue to build primary connect. I know is something that

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<v Speaker 3>a lot of people talk about but that's not the

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<v Speaker 3>only thing. We have a long list of to do

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<v Speaker 3>for how we're going to continue to develop the Connect franchise.

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<v Speaker 2>Okay, what's holding it back? Though I know you can't

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<v Speaker 2>really I'm getting a sense you can't really tell me.

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<v Speaker 2>I mean, where are we in the dialogue with Beijing?

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<v Speaker 2>Because I know they're worried at a during a slowing economy,

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<v Speaker 2>They're worried about outflows.

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<v Speaker 3>Obviously, So I think everything has its moment and to

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<v Speaker 3>make sure that it's successful, you want to capture the

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<v Speaker 3>best moments, right So, Ipeel, you know you're very focused

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<v Speaker 3>on it. I can see the world has gone through

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<v Speaker 3>a couple of years with relatively muted IPO activities. We

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<v Speaker 3>are very happy that we're seeing a strong pickup in

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<v Speaker 3>the Hong Kong market, and therefore, you know, I think

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<v Speaker 3>we just need to continue to build on that and

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<v Speaker 3>make sure that in fact, the strength of the IPO

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<v Speaker 3>market returns. And I think with a stronger base and

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<v Speaker 3>you know, a more robust pipeline, the conditions will be riper.

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<v Speaker 2>Okay, So right now that the conditions are not necessarily right,

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<v Speaker 2>we raised about nine billion this year, I believe five

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<v Speaker 2>and a third billion last year, so it's better than

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<v Speaker 2>last year, but it's way off of twenty twenty. Was

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<v Speaker 2>it twenty there was fifty three billion or something like that,

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<v Speaker 2>So you have a ways to go. So again I'm

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<v Speaker 2>going to come back to the primary connect. Is it

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<v Speaker 2>on the docket for next year?

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<v Speaker 3>Okay? So let's talk about where we are in terms

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<v Speaker 3>of the IPO activities. And I'm very happy to report

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<v Speaker 3>it because last time we spoke, I think, you know,

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<v Speaker 3>in terms of our league table ranking, we are a

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<v Speaker 3>little bit bit sort of at the bottom.

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<v Speaker 1>Of the top ten.

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<v Speaker 3>Shore we say we're now and we have completed a

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<v Speaker 3>very big IPO idea, which is a four point six

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<v Speaker 3>billion US IPO, the second largest in the world this

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<v Speaker 3>year and the largest in the consence. Yeah, since February

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<v Speaker 3>twenty twenty one.

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<v Speaker 2>As Holdings possibly too.

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<v Speaker 3>I think they are about to launch.

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<v Speaker 2>They just announced that they've been Bard approval.

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<v Speaker 3>Going hopefully to bring our total fundraise this year to

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<v Speaker 3>above ten billion US, which I understand, right, compared to

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<v Speaker 3>previous years, it's you know, a little bit, you know,

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<v Speaker 3>sort of slower. However, I think you know, you need

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<v Speaker 3>to look at the relative ranking and for the rest

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<v Speaker 3>of the world. You know, the last two years have

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<v Speaker 3>not been a particularly conducive year of IPO activities, but

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<v Speaker 3>you know, I think we've reached a pivot point and

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<v Speaker 3>I'm certainly seeing momentum pickup.

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<v Speaker 2>So if there's not a deliverable on these other initiatives,

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<v Speaker 2>including what reads was announced earlier this year in April,

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<v Speaker 2>we don't have a date for the beginning of that

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<v Speaker 2>inclusion into the So.

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<v Speaker 3>A lot of enhancements have been announced as you know.

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<v Speaker 3>So besides read Way, we also have we also have

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<v Speaker 3>self bound R and B counter which is in the works.

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<v Speaker 3>And like I said earlier, with all those you need

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<v Speaker 3>to make sure that the plumbing works, and we're working

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<v Speaker 3>together with our friends on the mainland to make sure

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<v Speaker 3>that you know, all the system upgrades, all the infrastructure

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<v Speaker 3>are built in in a way which you will make

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<v Speaker 3>sure that the rollout is very, very smooth.

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<v Speaker 2>Last November we also got an announcement that there would

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<v Speaker 2>be trading in treasury bond futures. We don't have any

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<v Speaker 2>start data that as well. Do you have any update

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<v Speaker 2>for it?

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<v Speaker 3>Well, I don't you know, Okay, I'll give you the

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<v Speaker 3>same answer. Right. We have been working on the technical

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<v Speaker 3>aspects to make sure that you know, the rollout will

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<v Speaker 3>be smooth, and I don't worry about sort of not

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<v Speaker 3>having a date because as you can see right, you know,

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<v Speaker 3>recently we've seen a lot of measures being announced by

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<v Speaker 3>Beijing and all that have a very huge impact in

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<v Speaker 3>the market. Right you saw the rally and early October,

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<v Speaker 3>end of September, early October, and therefore I really don't

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<v Speaker 3>worry about, you know, seeing all these positive momentum build up.

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<v Speaker 3>In fact, you know, we just need to make sure

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<v Speaker 3>that you know, there is a way to be ready

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<v Speaker 3>for it, and not just being technical ready. The market

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<v Speaker 3>also needs to be ready for it.

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<v Speaker 2>I had to ask you what do you think is

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<v Speaker 2>going to be the Trump effect on the Chinese economy

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<v Speaker 2>and how that equates to capital raising, potential action against

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<v Speaker 2>China and the dampening effect possibly on the market here.

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<v Speaker 3>Okay, I know that question will come now to me.

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<v Speaker 3>What we saw is that the week leading to the

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<v Speaker 3>US presidential election and the training volume actually is softened

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<v Speaker 3>a little bit in our market. But as soon as

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<v Speaker 3>the election is over, we saw the volume got back

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<v Speaker 3>up again. So I think, you know, with the presidential

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<v Speaker 3>elections now behind us, there is now sort of the

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<v Speaker 3>market knows how to move on, which is a good

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<v Speaker 3>thing to me. You know, this is not the first

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<v Speaker 3>time US has Trump is the president. We've gone through that.

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<v Speaker 3>What our market has continued to prove is that, you know,

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<v Speaker 3>whatever the conditions are, we have that resilience to make

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<v Speaker 3>sure that we can write the tide.

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<v Speaker 1>That was h k e X CEO Bonnie Chan speaking

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<v Speaker 1>with Bloomberg's Steven Engel.