Hong Kong as an International Financial Centre (Teacher’s notes)

Guiding questions
1. According to Mr. Hui, what are the strengths and opportunities of Hong Kong as an
international financial hub?

Strengths
1. Cornerstone: Currency Stability
e.g., The Linked Exchange Rate System was implemented in 1983, pegged at 7.8 HKD per 1
USD.
2. Cornerstone: Banking Stability
-total deposits, capital and liquidity ratio
3. Cornerstone: Strong Ecosystem
-talent, innovation, technology, institutional advantages
4. Top international financial centre
-gateway to mainland China, being broad-based (multiple aspects)
5. A leading asset & wealth management hub
6. A highly liberal, liquid and deep capital market

Opportunities
1. Continue to strengthen our gateway function (to mainland China)
2. Wealth Management Connect
3. Development of Greater Bay Area (GBA) brings Hong Kong new opportunities
4. A vibrant fintech landscape -e.g., virtual banks
5. Green Finance: Helping firms and investors to go GREEN
-e.g., issues of green bonds for projects and constructions
6. International and Regional Co-operation

2. To your knowledge, are there potential weaknesses and threats? Please provide some examples
to illustrate your points.
-introduce the SWOT analysis and explain weaknesses are about internal factors that are
underperforming while threats refer to external factors with the potential to cause problems
-Students brainstorm ideas based on their knowledge and understanding.
-Students may refer to additional information pages 1-2 for more ideas on weaknesses;
additional information pages 3-5 for more ideas on threats. Students are reminded of the
importance of critical thinking and analyse various sources of information.

Weaknesses
1. A slump in Hang Seng Index
-the Hong Kong stock market emerged as one of the poorest-performing globally, with the
benchmark Hang Seng Index closing at 15,308 points on 19 Jan 2024, signaling a 24 percent
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decline from its starting point of 20,145 points at the beginning of this year.
2. Higher vacancy rate of Grade-A office
-Demand for Grade A offices remained subdued, leading to a 5.3% decrease in overall rents by the
end of November (2023). According to JLL, the vacancy rate of Grade A offices rose (from 12.1%
in December 2022) to 12.9% by the end of 2023, whilst Central’s vacancy rate increased to 9.9%.
-With slowing demand and an impending influx of supply, Grade-A office rents are 31 percent
lower than in 2019, according to JLL data (2 Aug 2023, The Strait Times).
3. Credit rating: stable or negative outlook
-Standard & Poor's credit rating for Hong Kong stands at AA+ with stable outlook. Moody's credit
rating for Hong Kong was last set at Aa3 with negative outlook.

Threats
-business environment, human capital, infrastructure, financial sector development, reputational and
general (competitors in Asia, e.g., Singapore, Shanghai, Shenzhen & Beijing)

-Unattractive stamp duty

China: the stamp duty on securities trading is halved from August 28, 2023, from 0.1 percent to
0.05 percent.
HK: The stamp duty rate on transfers of Hong Kong stock would be reduced from 0.13% to 0.1%
for both the buyer and the seller (announced in November 16. 2023)
Singapore: Stamp duty is payable at 0.2% of the value of the shares.

3. To what extent do you think “Hong Kong is an international financial centre”? Please justify
your answer.
-Students analyse the situation of Hong Kong using SWOT analysis and decide to a large/
certain/ small extent they agree with the statement. (individual work [Think])
-work in pairs and tell each other about their judgement with reasons ([Pair])
-share their discussion and decision in class ([Share])

4. Facing competitors in Asia including Singapore, Shanghai and Shenzhen, how can
Hong Kong solidify its position as a global financial hub?
-analyse the issue from different perspectives.
e.g., Fintech, cross-border financial services, attracting establishment/ re-location of family
offices, attracting talents and professionals etc.
-Students may refer to Delina, L.L., Lam, R.Y.H., Tang, W.S. et al. (2023). Mapping the actor
landscape of a future fintech-funded renewable energy ecosystem in Hong Kong. J Environ
Stud Sci 13, 419–427 . https://doi.org/10.1007/s13412-023-00839-4 for more ideas
-complete the SWOT worksheet with their recommendations (they may put it in their e-
learning profile)

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SWOT Analysis

Strengths
Strengths in SWOT refer to internal initiatives that are performing well. Examining these areas
helps you understand what’s already working. You can then use the techniques that you know work
—your strengths—in other areas that might need additional support, like improving your team’s
efficiency.

When looking into the strengths of your organization, ask yourself the following questions:
What do we do well? Or, even better: What do we do best?
What’s unique about our organization?
What does our target audience like about our organization?
Which categories or features beat out our competitors?

Weaknesses
Weaknesses in SWOT refer to internal initiatives that are underperforming. It’s a good idea to
analyze your strengths before your weaknesses in order to create a baseline for success and
failure. Identifying internal weaknesses provides a starting point for improving those projects.

Identify the company’s weaknesses by asking:

Which initiatives are underperforming and why?
What can be improved?
What resources could improve our performance?
How do we rank against our competitors?

Opportunities
Opportunities in SWOT result from your existing strengths and weaknesses, along with any
external initiatives that will put you in a stronger competitive position. These could be anything from
weaknesses that you’d like to improve or areas that weren’t identified in the first two phases of your
analysis.

Since there are multiple ways to come up with opportunities, it’s helpful to consider these questions
before getting started:
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What resources can we use to improve weaknesses?
Are there market gaps in our services?
What are our business goals for the year?
What do your competitors offer?

Threats
Threats in SWOT are areas with the potential to cause problems. Different from weaknesses,
threats are external and ‌out of your control. This can include anything from a global pandemic to a
change in the competitive landscape.

Here are a few questions to ask yourself to identify external threats:

What changes in the industry are cause for concern?
What new market trends are on the horizon?
Where are our competitors outperforming us?

Source: SWOT Analysis: Examples and Templates [2023] • Asana

Further reading
Delina, L.L. (2023). Fintech RE in a global finance centre: Expert perceptions of the benefits of and
challenges to digital financing of distributed and decentralised renewables in Hong Kong. Energy
Research & Social Science, 1-8. https://doi.org/10.1016/j.erss.2023.102997
Delina, L.L., Lam, R.Y.H., Tang, W.S. et al. (2023). Mapping the actor landscape of a future fintech-
funded renewable energy ecosystem in Hong Kong. J Environ Stud Sci 13, 419–427 .
https://doi.org/10.1007/s13412-023-00839-4
https://hongkongbusiness.hk/commercial-office/news/grade-office-vacancy-rises-129-in-2023
https://www.straitstimes.com/business/hong-kong-office-rent-collapse-triggers-wave-of-upgrades
https://www.longfinance.net/programmes/financial-centre-futures/global-financial-centres-index/
https://www.info.gov.hk/gia/general/202205/11/P2022051100320.htm
https://tradingeconomics.com/hong-kong/rating
https://www.basiclaw.gov.hk/filemanager/content/en/files/anniversary-reunification15/anniversary-
reunification15-ch3-3.pdf
https://www.info.gov.hk/gia/general/202109/08/P2021090800675.htm (attracting talents)
https://fintechnews.hk/
https://www.familyofficehk.gov.hk/
https://www.hkengage.gov.hk/en/
https://internationalfinance.com/magazine/banking-and-finance-magazine/hong-kong-may-lose-its-status-of-
financial-hub/
https://www.youtube.com/watch?v=1dnns7TumPI

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