Hong Kong's capital markets concluded 2024 with significant advancements, particularly in asset management and market connectivity. The exchange-traded fund (ETF) market witnessed a substantial increase in daily turnover by 35% year-over-year to $18.9 billion, accounting for 14% of total stock market activity. Additionally, net inflows into Hong Kong-domiciled funds surged 88%, while market connectivity initiatives, including cross-listings and enhanced schemes, further strengthened investor confidence.

Advancements in Asset Management Drive Market Growth

The asset management sector has seen remarkable progress, notably through the growth of ETFs. The average daily turnover for ETFs soared by 35% YoY, reaching $18.9 billion. This robust performance reflects increased investor participation and trust in Hong Kong's financial markets. Moreover, the number of ETFs grew by 11%, totaling 194, indicating a diverse and expanding market.

Investors poured $22.8 billion into ETFs over the year, showcasing strong demand. The assets under management for Hong Kong-domiciled funds also saw a significant boost, increasing by 22% to reach $1.64 trillion. These figures highlight the growing appeal of Hong Kong as a hub for asset management. The surge in net inflows, up 88% to $162.9 billion, underscores the improving sentiment among investors towards Hong Kong's financial stability and opportunities. Enhanced regulatory frameworks and market reforms have played crucial roles in attracting more capital, solidifying Hong Kong's position as a leading financial center.

Enhanced Market Connectivity Bolsters Investor Confidence

Market connectivity initiatives have been pivotal in strengthening Hong Kong's capital markets. Notably, the cross-listing of two Hong Kong ETFs in Saudi Arabia marked a significant milestone. These ETFs, being the largest in the Saudi market, had a combined market capitalization of $2.1 billion as of December, demonstrating the growing international recognition of Hong Kong's financial products.

Further enhancements to the ETF Connect scheme and the listings of several leading Mainland companies in Hong Kong since April 2024 have deepened market integration. The Mainland-Hong Kong Mutual Recognition of Funds scheme, effective from January 2025, has significantly bolstered Hong Kong fund sales. Stock Connect experienced a 55% jump in average daily southbound trading to $48.2 billion, representing 18% of Hong Kong market turnover. Southbound net inflows hit a 10-year high of $807.9 billion, with cumulative inflows nearing $3.7 trillion as of December. Licensing data also showed an upward trend, with the total number of licensed corporations rising 1.5% and license applications increasing 15% by the end of 2024. The SFC's efforts to grant licenses to virtual asset trading platforms and launch the “ASPIRe” roadmap further cement Hong Kong’s role as a global virtual asset hub. Additionally, the SFC launched an anti-scam campaign titled “Don’t be Sucker” to protect investors from common scams. Financially, the SFC reported a modest surplus of $77 million for the last quarter, reflecting the overall health of Hong Kong’s financial ecosystem.