Hong Kong Chief Executive John Lee unveiled his fifth Policy Address on Wednesday, September 16, alongside the territory's first five-year blueprint, outlining ambitious plans to solidify Hong Kong's status as a premier international financial hub. Both documents delegate a comprehensive set of mandates to the Securities and Futures Commission and the Hong Kong Exchanges and Clearing, covering listing rule reforms, trading settlement infrastructure, real estate investment trust market growth, and commodity regulatory frameworks, with several initiatives proceeding on defined timelines.

Listing regime set for phase two transformation

The Policy Address highlights the robust performance of Hong Kong's stock market, noting that new listing proceeds through August have already exceeded HK$340 billion, surpassing the full-year total for 2024. According to Choice data, as of September 15, 108 new companies have debuted on the exchange this year, raising over HK$360 billion, ranking among the top globally. In response, regulators will launch a second-phase consultation on enhancing listing mechanism competitiveness in the third quarter, aiming to streamline rules governing discloseable transactions, connected transactions, and spin-offs to reduce compliance burdens and boost flexibility for mergers, acquisitions, and business restructuring.

This follows earlier measures, including the 2023 stamp duty reduction, and comes after the Exchange published its first-stage consultation paper in March on listing competitiveness, which addressed weighted voting rights structures and overseas issuer frameworks. The conclusions of that consultation were released on July 24, with corresponding Listing Rules amendments taking effect immediately. Additionally, the Securities and Futures Commission will initiate consultations in 2027 on streamlining prospectus disclosure requirements to facilitate listing by high-quality overseas enterprises, while also collaborating with the Exchange to promote dual primary and secondary listings for companies from Southeast Asia and Belt and Road nations, and advancing the inclusion of Kazakhstan's qualified exchanges on the recognized stock exchange list.

18C thresholds face mandated re-examination

Liquidity from technology stocks currently represents more than 40% of total market turnover. The Exchange will launch consultations in the first half of 2027 on revising the Chapter 18C listing regime for specialist technology companies, including a review of market capitalization thresholds. Notably, the current temporary market cap concessions, which reduce minimum thresholds from HK$10 billion to HK$8 billion for uncommercialized companies, are set to expire at the end of August 2027. The Exchange believes there remains scope for further relaxation, with specific considerations covering the range of emerging industries included, valuation requirements, and application procedures.

Simultaneously, the Exchange will study optimizing Chapter 18C to attract companies from new sectors such as aviation and aerospace, further cementing Hong Kong's role as a funding hub for new economy enterprises. Currently, more than 50 companies in the robotics and embodied intelligence sectors are pending review at the Exchange, excluding those submitted confidentially. According to the five-year plan, the Exchange will also deepen collaboration with the Qianhai Equity Exchange to facilitate access for high-quality mainland enterprises to international capital markets, establishing a more efficient pipeline for their listings in Hong Kong.

Trading and settlement infrastructure advances

On the trading mechanism front, the Exchange is coordinating with market participants to prepare for the introduction of a T+1 settlement cycle for the cash market, subject to coordination with mainland authorities, to enhance capital turnover efficiency, although a definitive launch date has not yet been announced. The Exchange will also work with the Hong Kong Monetary Authority to introduce wholesale central bank digital currency, or "digital Hong Kong dollar," payment solutions for after-hours derivatives trading, with a target for real transactions by year-end.

The Exchange plans to drive the growth of derivatives and exchange-traded funds by supporting the industry in developing thematic equity indices, diversified bond indices, and exploring commodity indices, alongside launching more index-tracking ETFs and derivative products. Its derivatives market advisory group will also research the introduction of shorter-dated equity options and thematic futures and options. The Securities and Futures Commission will promote the optimization of cross-clearing house margin arrangements, expand acceptable non-cash collateral categories, and reduce associated fees.

Regarding ETF connectivity, authorities will facilitate mainland insurance funds investing in Hong Kong ETFs through the scheme, broaden the scope of eligible products, and promote mutual ETF listings between the Exchange and Southeast Asian exchanges, following the precedent of Middle East ETFs listing in Hong Kong and vice versa. Furthermore, restrictions on mandatory provident fund investments in eligible index-tracking ETFs, including overall investment caps, will be removed.

REIT market liberalization timeline clarified

Reforms for real estate investment trusts are progressing on a defined schedule. The Securities and Futures Commission will amend its code in the fourth quarter to streamline procedures and attract high-quality overseas REITs for dual listing in Hong Kong. The government will introduce a bill this year to facilitate REIT privatizations or restructurings, with a separate bill to waive stamp duty on non-residential property transfers for listing-ready REITs submitted in the first half of 2027. The commission will also expedite efforts to incorporate REITs into the connectivity programs.

Commodity regulatory framework follows

In the commodity and gold business arena, the Securities and Futures Commission will enhance the over-the-counter derivatives regulatory regime to facilitate risk and capital management for gold and other commodity transactions. The Mandatory Provident Fund Schemes Authority has already streamlined the approval process for gold ETFs in July. The Exchange will unveil details of a new renminbi-denominated, physically delivered gold futures contract this year and plans to launch an "LME Shanghai Hot-Rolled Coil" contract on the London Metal Exchange in October.

Additionally, the Exchange is building a blockchain-enabled multi-asset tokenization platform, which has already included carbon credits from Core Climate. Next year, it plans to pilot commodity warehouse receipts from LME-approved warehouses and aims to launch tokenized warehouse receipt financing pilot projects with designated banks by 2027.

Offshore renminbi business and green stock certification

The Exchange has launched an offshore renminbi bond index and will introduce a "Green Stock Certification Scheme" to enhance market recognition of eligible green securities issuers. This initiative draws on overseas market practices, requiring disclosure of the proportion of revenue derived from green or environmentally friendly projects. According to sources, this scheme is a new initiative with no specific launch date yet.

SFC and Exchange to discuss implementation

Both the Exchange and the Securities and Futures Commission have expressed support for the Policy Address and five-year plan. Exchange Chairman Charles Li stated that the documents clearly outline Hong Kong's development vision for the next five years, leading the city to align with national development strategies. As the country accelerates its push to build a financial powerhouse, Hong Kong will continue to leverage its unique advantages under "one country, two systems," rooted in mainland support and global connectivity. He affirmed the Exchange's commitment to supporting the policy direction, further consolidating Hong Kong's status as an international financial center, enhancing its global offshore renminbi hub functions, and supporting the development of the commodity trading ecosystem.

Exchange CEO Bonnie Chan remarked that the Exchange is the core of Hong Kong's financial market, playing a vital role as a financial market infrastructure operator. With a focus on connecting "people, goods, and markets," the Exchange will build a more comprehensive and internationally competitive multi-asset ecosystem, concentrating on four strategic directions: expanding the offshore renminbi asset, fixed income, currency, and commodity ecosystem; deepening the breadth and depth of the secondary market; enhancing Hong Kong's competitiveness as an international financing platform; and leveraging technology to empower financial market infrastructure.

Securities and Futures Commission Chairman Wong Tit-shing stated that given the significance of the five-year plan and Policy Address to Hong Kong's future development, the commission's board will explore further support for implementing the key measures, including strengthening Hong Kong's role as a global offshore renminbi hub and international asset and wealth management center, while enhancing the depth, breadth, and competitiveness of the local capital market.